Tag: Brent crude

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Commodities & Global Growth

Commodity prices warn that the global economy is still in a slump.

The Dow Jones – UBS Commodity Index remains at one-third of its 2007 peak, with no sign of recovery.

DJ-UBS Commodity Index

The fall in crude prices hasn’t been as severe, but Brent Crude is again weakening and looks set for another test of $50/barrel.

Brent Crude

Shipping rates for dry bulk goods, such as iron ore and coal, have fallen, with the Baltic Dry Index close to long-term support at 500.

Baltic Dry Index

Supply interruptions to iron ore production in Brazil have cushioned Australian producers from a sharp down-turn in iron ore prices. But coal exporters are feeling the pinch.

RBA Chart Pack: Bulk Commodity Prices

Recovery of Brazilian production over the next two years is expected to add downward pressure to iron ore prices.

The only positive appears to be container shipping rates. The Harpex Index rose steeply in 2019, reflecting increased demand for container shipping of finished goods.

Harpex Index

Somewhat surprising, since this coincided with US-China trade tensions and tariff increases. The answer may lie with importers on both sides of the Pacific attempting to front-run the imposition of tariffs and build inventories in case of supply interruptions and to allow time to adapt their supply chain. Expect the index to retreat in the early part of 2020.

It looks like low global growth will continue.

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The ‘black swan event’ that could send oil to $US25 a barrel | Business Insider

From Elena Holodny | May 24, 2016, 10:13 AM

Both WTI crude and Brent crude were around $US48 per barrel on Monday, well above their lows below $US30 per barrel earlier this year. But all of that may come crashing down if one “black swan event” transpires, argued a Bank of America Merrill Lynch global commodities research team.

From their recent note to clients (emphasis ours): “Global GDP in US dollar terms at market exchange rates is stagnant. Continued US dollar strength could force Saudi Arabia either to cut oil production modestly and push Brent back to $50 or de-peg the Saudi riyal, our black swan event, which could lead Brent to collapse to $25/bbl.”

While this certainly sounds ominous for the oil market, it’s worth noting that analysts and financiers are split on whether the Saudis will actually de-peg their currency and undo the current fixed exchange rate with the US dollar….

Source: The ‘black swan event’ that could send oil to $US25 a barrel | Business Insider

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Gold-Oil ratio says “Sell”

Spot Gold recently recovered above $1100, suggesting a short rally fueled by concern over China. The gold-oil ratio, however, soared to 33, signaling that gold is highly overbought relative to Brent Crude. Last time the gold-oil ratio reached 30 was 1988 — when the Iraq-Iran ceasefire eased global crude shortages — and before that when the Saudis substantially hiked crude oil production in 1985. Any gold rally is likely to be short-lived — with stubborn resistance at $1200/ounce — and followed by a test of support at $1000/ounce*.

Spot Gold and Brent Crude

* Target calculation: 1100 – ( 1200 – 1100 ) = 1000

The last time (2008) that Brent Crude reached these lows, gold fell to $700/ounce.

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Will Iran deal nuke crude?

The nuclear deal with Iran is likely to increase supply of crude oil, especially in European markets, driving down prices.

Brent Crude August 2015 Futures

Brent crude August 2015 contract (CBQ15 above) is testing support at $56 per barrel. Narrow consolidation suggests continuation of the down-trend. Breach of $56 would signal a test of primary support at $53.

Nymex WTI Light Crude August 2015 Futures

Nymex (WTI) Light Crude August 2015 contract (CLQ15) is in a similar pattern, with medium-term support at $51 and primary support at $49 per barrel.

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Crude dives below $58

Nymex Light Crude closed below support at $58 per barrel, signaling retracement to test medium-term support at $53. Respect of $53 would suggest an advance to $68/barrel, while failure would warn of a test of primary support at $44.

Nymex WTI Light Crude and Brent Crude

 

June 2020 futures broke support, at $70/barrel, suggesting a test of $50/barrel*.

June 2020 Light Crude

* Target calculation: 70 – ( 90 – 70 ) = 50

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Crude: Where next?

Nymex Light Crude plotted against CPI gives an historical perspective on current crude prices: high prior to China’s entry into the global energy market, but low relative to prices since then. Expect strong support at the 2008 low.

Nymex WTI Light Crude and Brent Crude

Has fracking permanently suppressed oil prices, or will production dwindle over time in response to lower prices? Oil well efficiency is rising as marginal wells are mothballed.

 

Production forecasts are rising.

 

Causing oil futures to fall. June 2020 Light Crude broke support at $70/barrel, offering a target of $55/barrel.

June 2020 Light Crude

* Target calculation: 70 – ( 85 – 70 ) = 55

Spot prices (Nymex Light Crude) continue to range between $58 and $61 per barrel. Reversal below $58 would signal retracement to test medium-term support at $54. Breakout above $61 is unlikely at present, but would signal a rally to $68/barrel.

Nymex WTI Light Crude and Brent Crude

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Crude retraces

Nymex Light Crude encountered solid resistance at $60/$61 per barrel. Reversal below $58 would signal retracement to test the new support level at $54. Respect would indicate an up-trend, while failure of $54 would test primary support at $44. Brent Crude [green] is already retracing and likely to test support at $54.

Nymex WTI Light Crude and Brent Crude

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Crude finds resistance at $60/barrel

Nymex light crude encountered resistance at $60/barrel. Expect retracement to test the new support level at $54/barrel. Respect would indicate a primary advance, while failure would suggest recent gains are no more than a bear market rally and another test of $44 is likely. 13-Week Twiggs Momentum below zero continues to reflect a primary down-trend.

Brent Crude and Nymex WTI Light Crude

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Crude: Reversal or bear rally?

Inflation-adjusted crude oil prices are close to their 2008 low, but if we look back to the 1980s and 1990s, prior to China’s entry into the markets (apart from a brief spike in September 1990) that was the 20-year high.

Nymex WTI Light Crude over CPI

Nymex light crude rallied since breaking resistance at $54/barrel, but this does not necessarily indicate a reversal. Only retracement that respects the new support level (at $54) would confirm this a primary up-trend rather than a bear market rally.

Brent Crude and Nymex WTI Light Crude

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Crude breakout: exercise caution

Nymex Light Crude broke resistance at $55/barrel, signaling the end of the narrow consolidation of the past few months. Some have heralded this as the end of the bear trend and start of a bull market.

Brent Crude and Nymex WTI Light Crude

If we examine the recent consolidation — shown here on June 2015 Light Crude futures — it is clear that it is broadening, with the second trough below the first, rather than rectangular. Peaks are likely to follow a similar pattern; so a higher peak does not necessarily mean a breakout. Broadening wedges tend to be unreliable reversal signals and I would wait for retracement that respects the new support level at $55 to confirm the breakout.

Nymex WTI Light Crude June 2015 Futures

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