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Showing posts with label Energy. Show all posts
Showing posts with label Energy. Show all posts
Monday, July 13, 2009
Sunday, June 14, 2009
Crude oil update
Crude oil is now in the final impulse of the corrective upmove that began in late Feb this year. Prices have now risen to level which are consistent with resistance level of previous lower degree corrective 4. In previous updates I had mentioned the probability that oil will peak out at $68 - $72 range and a final impulsive peak cab be expected at $76 if these price levels are breached.
Currently crude oil traded at $72.5 in after hours globex market. Current Elliott wave structure suggest that the final leg 5 of 5th of wave ‘C’ is in force. Wave ‘5’ is tracing out an expected ending diagonal pattern. Strategy should be to wait and sell crude oil short on a break below $70.5 on completion of this pattern.
Currently crude oil traded at $72.5 in after hours globex market. Current Elliott wave structure suggest that the final leg 5 of 5th of wave ‘C’ is in force. Wave ‘5’ is tracing out an expected ending diagonal pattern. Strategy should be to wait and sell crude oil short on a break below $70.5 on completion of this pattern.
Wednesday, June 03, 2009
‘V’ is the word for 2009
‘V’ is the word for 2009 so far. I don’t know many market participants who saw the current market rally to be so furious and so fast. Neither did I expect. At best many traders called for a 50% rally over a period of few quarters. Now with most of stock Indices hovering around their 200 DMA in western markets and all Asian indices much higher from their 200 DMA question still looms whether we have entered a bull market or not. In my previous updates on S&P CNX Nifty 50, i.e. the Indian stock index, I had mentioned that prices suggest a bottom when we crossed above the all crucial level of 3200. Asian market too looks like they have formed a strong base. The trouble is the western stock markets. There is no clear indication from these indices whether this is a bear market rally or beginning of a new bull market.
The US stock markets have risen sharply over the last two months. The S&P 500 has rallied to a new high for 2009 which is 39.6% above the March 9th low. There are sector which have rallied in excess of 50% like materials and financials. There are some important changes in different markets that have occurred in the current calendar year. The US yield curve has steepened significantly and commodity prices have staged a strong rally along with an incessant fall in USD. The rising bond yields in a deflationary expectation scenario gave an early signal that stock prices will rebound sharply over a period of time. Equity markets always lag the bond markets and this was true this time also. There are two distinct signals that come from rising bond yields. First is the clear expectation of market participants that the economy is going to recover and growth will lead to inflation. Bond yields would also rise if there is an expectation of inflation without growth. This is a rare phenomenon and can occur only in case of misallocation of capital. This may happen if there is demand for goods and services due to excess liquidity instead of rise in base aggregate demand. Now the current scenario has seen continued unemployment in the US, EU and other western markets. There is continued weakness in retail sales and housing markets in whole of the western world. With stocks rising steadily, the real economy has not thrown out numbers which should appear after such a market recovery. This means that the monetization of debt has lead to a dramatic rise in expectation of a high inflation environment just after a severe deflationary threat. If we see the trajectory of inflation for the last one decade, there has been a dramatic shift from high inflation expectation – just at the turn of the century, then a deflationary threat due to tech bubble, then a high inflationary scenario due to the oil shock and back to deflationary expectation because of the financial melt down. The rapid change in inflationary expectation has been due to the severe monetary policy measured taken by central banks all over the world. The central bank either cut rates too low too soon or remained stubborn over a period of poor growth environment with high interest rates.
With bond yield steadily rising in the western world there is another phenomenon that explains the rise in bond yields. The buyers of western agency and government debt, especially the Asian countries are now worried about the long term stability of most of the western currencies and economies. This is leading them to purchases short term debt and either selling or not buying the long term debt especially in the US. This is leading to a steeping yield curve and a seeming expectation of a rise in inflation expectation. However this theory suffers from a serious threat from commodity prices. Most of inflation sensitive commodities like oil and copper have risen sharply. Gold has lagged this rally but is still near its all time high. The commodity indices have rallied sharply and steadily with support from agricultural commodities which are not directly linked with inflation and are generally cyclical and seasonal. The USD has been another factor which has supported this rally in energy, metals and some agricultural markets. The markets are devaluing the USD and there is a seeming revaluation of commodity prices. It’s been seen time and again the social moods drive the economy rather than the other way round. The bear market of 2008 has left most of the participants fearful of a fall in stock markets. Even a slight correction triggers bad investor confidence and poor financial reporting. So it’s prudent to keep and eye on how the USD moves once equity markets correct. Ultimately investors and governments along with their central banks have always returned to USD in times of crises and it becomes the safe haven when there is a real panic in the market. The argument that USD is doomed in the long term have held but in times of crises investors fear for their funds to be in a place which is ‘too big to fail’ or with some real value like gold.
Rising bond yield combined with huge monetization of debt and an every increasing money supply is creating inflationary expectation. More than any where else the Asian markets with excessively low inflation, high money supply and growing economies are being targeted by all the excess liquidity in the markets. This massive money supply which is not being lent to consumers in the western markets is now travelling to emerging markets and to any other asset class which has some real value or growth expectation. Stock prices in Asia have exploded without any correction as foreign investors flock to these markets. This was augmented with a huge short covering that triggered the bottom in most emerging market equity indices.
Current intermarket relationships suggest that rising bond yields are indeed pointing to inflationary expectation. If bonds stage a rally from the current level, which looks like it would happen sooner than later, it is just a matter of time before the downtrend begins again as high inflation scenario is here to stay for the next few years.
For the next few weeks to quarters focus should be given to movements in the USD, Euro and JPY along with the strength in gold. If equity markets see strong falls on rising volumes and gold rises with ever increasing investment demand, it would be good to have your funds in commodities which have value. Asian and emerging market might be the bubble of the new millennium built of the highest money supply that was ever created.
The US stock markets have risen sharply over the last two months. The S&P 500 has rallied to a new high for 2009 which is 39.6% above the March 9th low. There are sector which have rallied in excess of 50% like materials and financials. There are some important changes in different markets that have occurred in the current calendar year. The US yield curve has steepened significantly and commodity prices have staged a strong rally along with an incessant fall in USD. The rising bond yields in a deflationary expectation scenario gave an early signal that stock prices will rebound sharply over a period of time. Equity markets always lag the bond markets and this was true this time also. There are two distinct signals that come from rising bond yields. First is the clear expectation of market participants that the economy is going to recover and growth will lead to inflation. Bond yields would also rise if there is an expectation of inflation without growth. This is a rare phenomenon and can occur only in case of misallocation of capital. This may happen if there is demand for goods and services due to excess liquidity instead of rise in base aggregate demand. Now the current scenario has seen continued unemployment in the US, EU and other western markets. There is continued weakness in retail sales and housing markets in whole of the western world. With stocks rising steadily, the real economy has not thrown out numbers which should appear after such a market recovery. This means that the monetization of debt has lead to a dramatic rise in expectation of a high inflation environment just after a severe deflationary threat. If we see the trajectory of inflation for the last one decade, there has been a dramatic shift from high inflation expectation – just at the turn of the century, then a deflationary threat due to tech bubble, then a high inflationary scenario due to the oil shock and back to deflationary expectation because of the financial melt down. The rapid change in inflationary expectation has been due to the severe monetary policy measured taken by central banks all over the world. The central bank either cut rates too low too soon or remained stubborn over a period of poor growth environment with high interest rates.
With bond yield steadily rising in the western world there is another phenomenon that explains the rise in bond yields. The buyers of western agency and government debt, especially the Asian countries are now worried about the long term stability of most of the western currencies and economies. This is leading them to purchases short term debt and either selling or not buying the long term debt especially in the US. This is leading to a steeping yield curve and a seeming expectation of a rise in inflation expectation. However this theory suffers from a serious threat from commodity prices. Most of inflation sensitive commodities like oil and copper have risen sharply. Gold has lagged this rally but is still near its all time high. The commodity indices have rallied sharply and steadily with support from agricultural commodities which are not directly linked with inflation and are generally cyclical and seasonal. The USD has been another factor which has supported this rally in energy, metals and some agricultural markets. The markets are devaluing the USD and there is a seeming revaluation of commodity prices. It’s been seen time and again the social moods drive the economy rather than the other way round. The bear market of 2008 has left most of the participants fearful of a fall in stock markets. Even a slight correction triggers bad investor confidence and poor financial reporting. So it’s prudent to keep and eye on how the USD moves once equity markets correct. Ultimately investors and governments along with their central banks have always returned to USD in times of crises and it becomes the safe haven when there is a real panic in the market. The argument that USD is doomed in the long term have held but in times of crises investors fear for their funds to be in a place which is ‘too big to fail’ or with some real value like gold.
Rising bond yield combined with huge monetization of debt and an every increasing money supply is creating inflationary expectation. More than any where else the Asian markets with excessively low inflation, high money supply and growing economies are being targeted by all the excess liquidity in the markets. This massive money supply which is not being lent to consumers in the western markets is now travelling to emerging markets and to any other asset class which has some real value or growth expectation. Stock prices in Asia have exploded without any correction as foreign investors flock to these markets. This was augmented with a huge short covering that triggered the bottom in most emerging market equity indices.
Current intermarket relationships suggest that rising bond yields are indeed pointing to inflationary expectation. If bonds stage a rally from the current level, which looks like it would happen sooner than later, it is just a matter of time before the downtrend begins again as high inflation scenario is here to stay for the next few years.
For the next few weeks to quarters focus should be given to movements in the USD, Euro and JPY along with the strength in gold. If equity markets see strong falls on rising volumes and gold rises with ever increasing investment demand, it would be good to have your funds in commodities which have value. Asian and emerging market might be the bubble of the new millennium built of the highest money supply that was ever created.
Tuesday, June 02, 2009
WTIC and Copper wave count update
Last update showed how these two commodities are entering the 5th wave impulse. Copper prices have risen strongly and are now at fresh highs for 2009. The 5th wave of the wave '1' of new impulse is now in progress. Strong confluence resistance rests at levels of 242 and then 250 - 264 range. The triangle formation completion has invalidated the previous alternate count and emphasized the base count. See the following graph
Crude oil entered the 5th wave of wave 'C' of final corrective wave 4. The wave 3 of 5 is nearing completion and crude oil might take a breather before tracing out wave 4 and 5. Please see previous post for complete update. Following is the short term graph -
There is strong confluence resistance at $68 - $72 range. Look for rally to exhaust at these levels. Further resistance is at $76 if these levels do not hold.
Friday, May 29, 2009
Natgas Jumps again!!!
Natural Gas prices very sharply up after retracing the previous rise. In the last post I had highlighted that Natgas is a buy on any weakness and this dip is an excellent opportunity to be on the long side of Natgas.
See these graphs -
Current prices have a strong support at swing low of $3.38 and pivot support is at $3.10. Natgas is expected to rise to $5 from current price levels.
See these graphs -
Current prices have a strong support at swing low of $3.38 and pivot support is at $3.10. Natgas is expected to rise to $5 from current price levels.
Thursday, May 28, 2009
Elliott wave Analysis - Crude oil nearing top
Taking previous view on crude oil forward it seems crude oil is now in a process of toping out. Yesterday’s price action is suggestive of price entering 3 of 5 of C.
Once this final 5 wave upmove exhausts price would reverse.
Current wave count suggest that price may top at around $68 - $70 range before beginning their down move to previous lows of $33 and further to new lows.
Once this final 5 wave upmove exhausts price would reverse.
Current wave count suggest that price may top at around $68 - $70 range before beginning their down move to previous lows of $33 and further to new lows.
The complete down wave 3 was from 128.6 to 32.4. We look for fourth wave to retrace 38.2% of this wave which is at about $70. The corrective ABC calls for C = 1.618 X A which is at $62.5 and C = 2.0 X A is at $70.
Lower degree fourth wave of an extended third ended at $71.6.
There is a strong confluence resistance at $68 - $72 price levels.
On a one hour graph the rally looks impulsive. Look for sign of exhaustion after price jumps above $65.
Wednesday, May 27, 2009
Crude oil and copper wave count
Crude oil and copper has given an impressive rally in the past few months. Copper prices bottomed out before equity markets started the current uptrend and crude oil followed with a lag.
The current market picture in copper is impressive as elliott wave structure saw termination of the bear trend at the bottom. Now copper is in the process of forming the first impulse of the new bull market. The following graph will make it clear.
The current market picture in copper is impressive as elliott wave structure saw termination of the bear trend at the bottom. Now copper is in the process of forming the first impulse of the new bull market. The following graph will make it clear.
The alternate count shown above will have a very high probability if copper trades below 200 for a few days. Termination of wave 1 may occur at 245-250 range if the triangle completes.
Crude oil prices have rebounded sharply. As I had mentioned in the last post here that crude oil is still in the fourth wave of the wave 'A' correction, it has taken an expected amount of time to reach the current price levels. The current price picture is now calling for termination of the current uptrend in few weeks. Take a look at this graph. For previous posts see this link
Crude oil rally looks like nearing exhaustion. On hourly graphs we have entered the wave 5 of 5 of C. Look for reversal pattern in days to come, retracements can be very deep.
Thursday, May 07, 2009
Natgas Breaks out
Natural gas has broken out of a strong downtrend line. The prices surged yesterday closing above 50 DMA on NG continuous contract for the first time after it fell from its peak of 13.69.
Although US is swiming in Natgas with oversupply, the prices are now breaking out for the first time. This market is now clearly a buy on correction market.
Although US is swiming in Natgas with oversupply, the prices are now breaking out for the first time. This market is now clearly a buy on correction market.
Friday, January 23, 2009
Crude oil Wave Count
Since crude oil gave a breakdown below the expected tip of primary wave 1 the wave structure has changed dramatically. Long term price damage to crude oil prices is extensive and can lead lower prices over the next few years. Take a look at the current 'altered' wave count for crude oil -
We are now in the first leg down for crude oil. The current move is the wave 'A' of the ABC decline. The lower degree wave 4 ended at level of $25. So it is possible that crude oil prices might decline to this levels before the next bull run emerges. The short term for oil price is looking much more promising. In the wave 'A' we have already formed the wave 3 low and are possibly in wave 4. Take a look -
In the very short term crude oil may reach the expected target of $55 if it is able to cross $46 on a daily close. $38 should serve as a strong support.
For previous posts and analysis see this link - http://www.sahilkaps.blogspot.com/
We are now in the first leg down for crude oil. The current move is the wave 'A' of the ABC decline. The lower degree wave 4 ended at level of $25. So it is possible that crude oil prices might decline to this levels before the next bull run emerges. The short term for oil price is looking much more promising. In the wave 'A' we have already formed the wave 3 low and are possibly in wave 4. Take a look -
In the very short term crude oil may reach the expected target of $55 if it is able to cross $46 on a daily close. $38 should serve as a strong support.
For previous posts and analysis see this link - http://www.sahilkaps.blogspot.com/
Sunday, December 14, 2008
Reversal Signals emerging !!
Stock market crashes always leave a staggering amount of traders, speculators and others which take vow of never to return to this markets. Bear markets often make stocks speculative and the art of investing, a gamble. History gives us great insight into the mind of 'the crowd' which shows the various points of market indecisiveness.
There has been many instance where firms which were too big to fail, failed and left investors in lurch. It happened with the telephone stocks, railroads, over-leveraged arbitrageurs of 1980s, technology stocks, real estate and now the auto manufacturer. There is a very important lesson in all of the failures that they have something common. All market participants knew that the physical growth in volumes of there business is a given. It was in fact true. Just see the numbers for the aviation sector by clicking here .
However the aviation sector worldwide has lagged the market for decades and has given very poor return. Real estate boom and bust cycle is far more prevalent and pervasive. In the bull market the expectation of growth is taken as a proxy for growth in profitability and gives fuel to the bullish argument. When traders and investors realize that the profitability is very low, there is a rush to sell stocks at any given price. The age old fashion of asking 'how much' to pay for the stock can be of great help in finding correct sectors to enter.
The Dow Jones Industrial Average has been in a bear market since the begining of the 21st century priced in terms of gold. Take a look -
There has been many instance where firms which were too big to fail, failed and left investors in lurch. It happened with the telephone stocks, railroads, over-leveraged arbitrageurs of 1980s, technology stocks, real estate and now the auto manufacturer. There is a very important lesson in all of the failures that they have something common. All market participants knew that the physical growth in volumes of there business is a given. It was in fact true. Just see the numbers for the aviation sector by clicking here .
However the aviation sector worldwide has lagged the market for decades and has given very poor return. Real estate boom and bust cycle is far more prevalent and pervasive. In the bull market the expectation of growth is taken as a proxy for growth in profitability and gives fuel to the bullish argument. When traders and investors realize that the profitability is very low, there is a rush to sell stocks at any given price. The age old fashion of asking 'how much' to pay for the stock can be of great help in finding correct sectors to enter.
The Dow Jones Industrial Average has been in a bear market since the begining of the 21st century priced in terms of gold. Take a look -
The real test of the current bear market would be at the Dow Gold Ratio of 9. It has not traded below it after the gold window was taken out by Nixon. So if the conditions become worse than they are, this is the indicator to look forward for an early warning. The high yield bonds have been falling in prices and the spread on High Yields have gone out of proportion rising a staggering 770% in one year. But it has bounced of quite substantially in the last few days. Take a look at the High Yield Select Bond Index of 10.
Any rebound in this index will arguer well for the stocks in general. Now there is an important development that has taken place simultaneously in two different markets.
A - The USD has broken down forming a head and shoulders pattern and a failure of the fifth wave.
B - The commodity index is very near to a breakout.
Take a look at the CRB index divided by the USD index -
A - The USD has broken down forming a head and shoulders pattern and a failure of the fifth wave.
B - The commodity index is very near to a breakout.
Take a look at the CRB index divided by the USD index -
If this reversal holds than it would put the deflationary theory to rest and will give some respite to the continues asset devaluation taking place. The USD has broken down from a head and shoulder pattern and is falling steadily.
As I have already pointed out that crude oil has bottomed out for the short term and heading higher for some time, it is important to be cautious of the USD index as a reversal in USD may lead to a fall in all commodities to new lows.
USD has been acting as a gauge of the sentiment and a higher USD was showing risk aversion and stock fell in line with it. In the short term the correlation of a stronger USD and stronger equity market is broken. Risk aversion sentiment is ruling the markets. A stronger USD is important for US equities and will lead to stronger growth in world equity markets also. This correlation can give early leads into the markets.
These factors are giving some clues about the strength of current bear market. The economic conditions will worsen even more and more bad news comes in bunches. The stocks however look forward and a fruitful recovery will take some more time.
Indian stock markets have given a small rally of about 7.4% in the last one week. I mentioned in my previous post that this rally can last for about 1000 points. But there are signs that this rally lacks strength as the upmove are not showing impulsive behaviour. S&P CNX Nifty will face strong resistance at 3250 and the inflection support now stands at 2810. A close below this level would take markets lower.
The next two quarters would be the best time to accumulate high value, high dividend yield stocks. Markets would stretched to the downside and give investors the real time to buy which is the best thing about bear markets.
USD has been acting as a gauge of the sentiment and a higher USD was showing risk aversion and stock fell in line with it. In the short term the correlation of a stronger USD and stronger equity market is broken. Risk aversion sentiment is ruling the markets. A stronger USD is important for US equities and will lead to stronger growth in world equity markets also. This correlation can give early leads into the markets.
These factors are giving some clues about the strength of current bear market. The economic conditions will worsen even more and more bad news comes in bunches. The stocks however look forward and a fruitful recovery will take some more time.
Indian stock markets have given a small rally of about 7.4% in the last one week. I mentioned in my previous post that this rally can last for about 1000 points. But there are signs that this rally lacks strength as the upmove are not showing impulsive behaviour. S&P CNX Nifty will face strong resistance at 3250 and the inflection support now stands at 2810. A close below this level would take markets lower.
The next two quarters would be the best time to accumulate high value, high dividend yield stocks. Markets would stretched to the downside and give investors the real time to buy which is the best thing about bear markets.
Wednesday, December 03, 2008
Crude Oil Wave Count
Crude oil may have formed an important inflection low today when it touched the intraday low of $46.26 on NYMEX. The wave structure discussed previously remains the same. The extent of fall in crude oil is steep and magnified due to severe distress in the financial markets.
The trend still remains quite bearish for crude oil. The Elliott wave structure for crude oil shows that we are near the termination of the first corrective wave (A). An alternate count is possible which marks this as wave 3 of five wave down A. The current Elliott wave count on crude oil is show below.
Crude oil wave count
Long term count suggest that crude oil make take a lot of time to start its upmove again. Oil remains bullish for the long term and its current fall is corrective in nature.
Crude oil wave count
It is quite possible that crude oil may form low of $43.3 before beginning the wave 'B' of its corrective ABC pattern. The overall structure in oil remains bearish but short term analysis suggest that there is little incentive in shorting oil heavily.
Momentum indicators have started giving positive divergence but the price has not confirmed. If there is a confirmation by the wave of a trendline breakout, the conviction of a medium term bottom will be high. Currently the trendline stands at $54.
Crude oil positive divergence
Bullish sentiment in the oil market has hit a rock bottom. Even the most bullish of analyst have 'given in' to the steep price decline. But oil looks attractive at current price with a risk level of $43.
Friday, November 07, 2008
Similar Graphs - Similar result
Crude oil, copper and DJIA gave some positive up move signs. None was able to hold to support levels and now has broken down.
Copper and crude oil has given bearish breakdowns. Copper looks set to test its lows and crude oil may decline to $50 if it doesn't go above $65.5 on daily close. Take a look -
Crude oil
Copper
Prices may see some retest of resistance levels before going down.
Copper and crude oil has given bearish breakdowns. Copper looks set to test its lows and crude oil may decline to $50 if it doesn't go above $65.5 on daily close. Take a look -
Crude oil
Copper
Prices may see some retest of resistance levels before going down.
Wednesday, November 05, 2008
Three similar graphs
Take a look at these three graphs ( open in new windows separately)
Copper
Crude oil
Dow Jones Industrials
All these three graphs have a few things in common.
- MACD has given a crossover from very oversold levels.
- A double bottom is formed in Dow Jones on a daily chart, crude oil on a 240 minutes graph and copper on an hourly graph.
- Dow Jones is nearing its short term resistance level and RSI is getting into a congestion zone; Crude oil has formed a bullish engulfing pattern with a strong break on the RSI; copper HG has tested $1.78 three times in the last three days
There is a possibility of a significant rally in crude oil and copper as i mentioned in the last crude oil post. Short term resistance level of $72 was the top yesterday and $76 may see some more profit booking.
Copper is looking set to touch $2.08 and $2.25 after that breakout.
Copper
Crude oil
Dow Jones Industrials
All these three graphs have a few things in common.
- MACD has given a crossover from very oversold levels.
- A double bottom is formed in Dow Jones on a daily chart, crude oil on a 240 minutes graph and copper on an hourly graph.
- Dow Jones is nearing its short term resistance level and RSI is getting into a congestion zone; Crude oil has formed a bullish engulfing pattern with a strong break on the RSI; copper HG has tested $1.78 three times in the last three days
There is a possibility of a significant rally in crude oil and copper as i mentioned in the last crude oil post. Short term resistance level of $72 was the top yesterday and $76 may see some more profit booking.
Copper is looking set to touch $2.08 and $2.25 after that breakout.
Saturday, November 01, 2008
Crude oil conundrum
Crude oil prices have given their first weekly positive close in last five weeks. There is little evidence that the downtrend has ended but a positive bias is now emerging in the markets. We open up the next week with a new month. So there could be heightened activity in the crude oil market on Monday.
Over the years I have seen enough sharp swings in commodity markets when a new calendar month begins. There are two important developments in the long term crude oil price graph. The long term trend line has not been breached untill now and prices are oversold to the highest degree compared to last seven years. Have a look -
Crude oil prices are expected to move up to $72 and then $76. Current rebound may last till $80 and we may see some selling pressure at those levels. $63 should hold as a strong support if this upmove has to last.
Over the years I have seen enough sharp swings in commodity markets when a new calendar month begins. There are two important developments in the long term crude oil price graph. The long term trend line has not been breached untill now and prices are oversold to the highest degree compared to last seven years. Have a look -
Crude oil prices are expected to move up to $72 and then $76. Current rebound may last till $80 and we may see some selling pressure at those levels. $63 should hold as a strong support if this upmove has to last.
Monday, August 18, 2008
Crude oil Conundrum - II
As we proudly celebrated our Independence day here in India, a material change took place in the world currency markets and the commodities market. Euro plunged below 1.4700 against the USD and gold price broke an important support which may not bode well for bulls in the gold market.
Interestingly crude oil didn't go down as traders would have thought. Other major traded metals like silver, platinum and else were all down between seven percent to 10 percent. I was watching a major pivot in crude oil. The price range of $109 and $111 may not get broken this month in crude oil. Though it is not wise to go against the trend and buy on any support as market remains in a down trend, still there is room for some trade setup from this price. Have a look at the price graph below -
The current trend may get exhausted at $98 or on extension to $86. Though current price moves have nothing significant but a small reversal pattern appearing on today's hourly graph. If crude oil doesn't make a low below $109, we are in for a significant rally towards $125 to $130 in the next two weeks time. I say this as the probability of the first leg of downward move i.e. A of the corrective pattern may have formed at $111.35 which could have stretched to $109. Unless we close below $109 the probability of a significant bounce is very high as risk rewards favours the bulls rather than the bears. Otherwise if WTI traded on NYMEX closes below $109 a major bearish downward move will begin making all upmoves insignificant.
Looking at the long term graph the prices at clinging to a strong pivot support. Current trading at 113.35 we look at the long term channel and support at $109-$111 range.
Looking at the demand and supply picture the demand for oil has clearly suffered as US demand is down nearly 2.5% on an annual basis for the same period previous year. The short term energy outlook from DOE reveal several statistics which point towards weakening demand. The short term energy outlook estimated a moderate to flat growth in demand and a rise in production from Non-Opec members.
Note from the SHOE - 'If new projects come online as now anticipated, total non-OPEC supply is projected to rise by about 510,000 bbl/d in the second half of 2008 and by 850,000 bbl/d in 2009 compared with year-earlier levels. This compares with a 330,000 bbl/d decline in non-OPEC supply recorded during the first half of 2008'
In the short term crude oil prices would decline to lower levels and make surprise everyone on the extent of fall as it did on the steepness of rise. We should remember that we are in a long term bull market and if price decline to $75 also, it would be a much needed correction in its relentless rise to astronomical levels. Long term (i mean 3 years or more) crude oil is going to rise even faster and the fall would be only counter trend to the long term price moves. Long term demand and supply fundamentals still favour a strong rise in oil price but price never go up in a straight line, there would be trends and counter trends and we may focus our attention on trade setups rather than on big prices swings.
From current levels, unless crude oil closes below $109 there is little incentive to sell. We still remain in a downtrend in the medium term so the upmoves will be counter trending. Price may rise to $125 below starting the next downward move. On the Elliott wave count we may have formed the A of the corrective pattern and may well be into the B wave. Current a small wave 'a' inside wave B looks highly probable to take prices to $117 if $112.85 doesn't get violated.
Gold prices have plunged as per my expectation. August 21 can be a short term reversal day from a trend count perspective. Look for a loss in momentum in gold prices.
Equity price have been a no show as they gyrate in a range in the local markets. I feel upmove have that was sold into was on weak hands and next upmove may be sharp if Nifty doesn't break 4270.
I will put up a post on stocks and on gold in the next few days.
Sahil Kapoor
Comments are welcome
Interestingly crude oil didn't go down as traders would have thought. Other major traded metals like silver, platinum and else were all down between seven percent to 10 percent. I was watching a major pivot in crude oil. The price range of $109 and $111 may not get broken this month in crude oil. Though it is not wise to go against the trend and buy on any support as market remains in a down trend, still there is room for some trade setup from this price. Have a look at the price graph below -
The current trend may get exhausted at $98 or on extension to $86. Though current price moves have nothing significant but a small reversal pattern appearing on today's hourly graph. If crude oil doesn't make a low below $109, we are in for a significant rally towards $125 to $130 in the next two weeks time. I say this as the probability of the first leg of downward move i.e. A of the corrective pattern may have formed at $111.35 which could have stretched to $109. Unless we close below $109 the probability of a significant bounce is very high as risk rewards favours the bulls rather than the bears. Otherwise if WTI traded on NYMEX closes below $109 a major bearish downward move will begin making all upmoves insignificant.
Looking at the long term graph the prices at clinging to a strong pivot support. Current trading at 113.35 we look at the long term channel and support at $109-$111 range.
Looking at the demand and supply picture the demand for oil has clearly suffered as US demand is down nearly 2.5% on an annual basis for the same period previous year. The short term energy outlook from DOE reveal several statistics which point towards weakening demand. The short term energy outlook estimated a moderate to flat growth in demand and a rise in production from Non-Opec members.
Note from the SHOE - 'If new projects come online as now anticipated, total non-OPEC supply is projected to rise by about 510,000 bbl/d in the second half of 2008 and by 850,000 bbl/d in 2009 compared with year-earlier levels. This compares with a 330,000 bbl/d decline in non-OPEC supply recorded during the first half of 2008'
In the short term crude oil prices would decline to lower levels and make surprise everyone on the extent of fall as it did on the steepness of rise. We should remember that we are in a long term bull market and if price decline to $75 also, it would be a much needed correction in its relentless rise to astronomical levels. Long term (i mean 3 years or more) crude oil is going to rise even faster and the fall would be only counter trend to the long term price moves. Long term demand and supply fundamentals still favour a strong rise in oil price but price never go up in a straight line, there would be trends and counter trends and we may focus our attention on trade setups rather than on big prices swings.
From current levels, unless crude oil closes below $109 there is little incentive to sell. We still remain in a downtrend in the medium term so the upmoves will be counter trending. Price may rise to $125 below starting the next downward move. On the Elliott wave count we may have formed the A of the corrective pattern and may well be into the B wave. Current a small wave 'a' inside wave B looks highly probable to take prices to $117 if $112.85 doesn't get violated.
Gold prices have plunged as per my expectation. August 21 can be a short term reversal day from a trend count perspective. Look for a loss in momentum in gold prices.
Equity price have been a no show as they gyrate in a range in the local markets. I feel upmove have that was sold into was on weak hands and next upmove may be sharp if Nifty doesn't break 4270.
I will put up a post on stocks and on gold in the next few days.
Sahil Kapoor
Comments are welcome
Friday, July 18, 2008
Crude oil Conundrum
Crude oil prices declined nearly $19 in the past three days. I wrote in many previous posts that a top in energy and precious metals was nearing. I think traders would have sold when markets closed below the important support of $135.14. I mentioned earlier that USD is also nearing an end to its downfall. That it is time to be cautious and not bullish in gold. That the whole dynamics of different markets can change as most markets stand at the brink of getting into a trending zone.
Crude oil prices have completed an ending diagonal pattern. An ending diagonal pattern suggest the end of an important uptrend and this could well be an important top for crude oil. Prices may decline to $102 before making any new top. Lets have a look at the long term price pattern and the market structure:
The crude oil price rise has been parabolic and there is a probability that if crude oil breaks the $122 mark the market will fall like a stone. When a parabolic market breaks it usually retraces the complete run up. The current prices retracement can stretch to $102 in the near term on a daily closing below $120.
The price dynamics of crude oil in the long term remains very strong. Crude oil remains in the long term bull market and it would continue to do so over a decade of so. The current decline would be a sort of correction in the larger trend. There are several pivot points in the crude price moves.
The Elliott wave structure of the current prices moves shows that we were in the 3rd wave of the primary bull trend and may have ended the third wave at $148 and begun the corrective fourth wave. The wave of one lesser degree was the 5th wave which ended in an ending diagonal triangle pattern and is now unfolding into an expected zig zag pattern. It is easier to look at it and understand.
The crucial pivot points in the structure of the wave stands at $126, $122. A break below these levels well confirm a fall towards $100 or lower. I feel the crude oil market has formed a top just $7 ahead of my expected top at $155. At least this is what the prices are telling me when they formed an ending diagonal with a double top and two evening star patterns at the top.
Crude oil prices may rebound to $135 levels after touching $126 or so. This would form the 'B' wave of the corrective ABC correction. A near term target now stands at $122 on a retest of $135 with a risk level of $139.
The fundamentals for crude oil has not changed overnight. As I mentioned in my previous post (http://sahilkaps.blogspot.com/2008/06/dynamics-of-oil-price.html) that there has been a demand destruction of nearly 2 million barrels a day and a supply rise of a million barrel or so, the market has weakened accordingly. Important point to note is that if crude surprise above $139 from here then it would again get into a zone from which it can make new highs. Previously it had formed a double top formation at $120. The current market top looks more promising and a few investment banks have come up with confirmed articles that Mexico is hedging their produce by selling short in the future markets.
Crude oil is now witnessing a lot of overhead supply and once it breaks the $125-126 range there would be a huge pressure of long liquidation which will increase the steepness of the fall. On the contrary we should be cautious for any price reversal that may arise.
Sahil Kapoor
Crude oil prices have completed an ending diagonal pattern. An ending diagonal pattern suggest the end of an important uptrend and this could well be an important top for crude oil. Prices may decline to $102 before making any new top. Lets have a look at the long term price pattern and the market structure:
The crude oil price rise has been parabolic and there is a probability that if crude oil breaks the $122 mark the market will fall like a stone. When a parabolic market breaks it usually retraces the complete run up. The current prices retracement can stretch to $102 in the near term on a daily closing below $120.
The price dynamics of crude oil in the long term remains very strong. Crude oil remains in the long term bull market and it would continue to do so over a decade of so. The current decline would be a sort of correction in the larger trend. There are several pivot points in the crude price moves.
The Elliott wave structure of the current prices moves shows that we were in the 3rd wave of the primary bull trend and may have ended the third wave at $148 and begun the corrective fourth wave. The wave of one lesser degree was the 5th wave which ended in an ending diagonal triangle pattern and is now unfolding into an expected zig zag pattern. It is easier to look at it and understand.
The crucial pivot points in the structure of the wave stands at $126, $122. A break below these levels well confirm a fall towards $100 or lower. I feel the crude oil market has formed a top just $7 ahead of my expected top at $155. At least this is what the prices are telling me when they formed an ending diagonal with a double top and two evening star patterns at the top.
Crude oil prices may rebound to $135 levels after touching $126 or so. This would form the 'B' wave of the corrective ABC correction. A near term target now stands at $122 on a retest of $135 with a risk level of $139.
The fundamentals for crude oil has not changed overnight. As I mentioned in my previous post (http://sahilkaps.blogspot.com/2008/06/dynamics-of-oil-price.html) that there has been a demand destruction of nearly 2 million barrels a day and a supply rise of a million barrel or so, the market has weakened accordingly. Important point to note is that if crude surprise above $139 from here then it would again get into a zone from which it can make new highs. Previously it had formed a double top formation at $120. The current market top looks more promising and a few investment banks have come up with confirmed articles that Mexico is hedging their produce by selling short in the future markets.
Crude oil is now witnessing a lot of overhead supply and once it breaks the $125-126 range there would be a huge pressure of long liquidation which will increase the steepness of the fall. On the contrary we should be cautious for any price reversal that may arise.
Sahil Kapoor
Saturday, June 28, 2008
Dynamics of 'The Oil Price'
. . . . . . . 'At $100 oil OPEC could potentially buy Bank of America in two months worth of production, Apple Computers in two weeks and GM in just 6 days. It would take less than three years of production for OPEC to own 20% (which essentially ensures a voting block in most corporations) of every S&P 500 company' . . . . . . IAGS, Oil and the new economic order
Think what it can do at $150 oil.
OPEC and other oil rich regions have gathered such tremendous amount of wealth that a shift in the global economic order is imminent. While the world talked about the Asian growth and how it will supersede the western 'first world' in economic prosperity. However OPEC and other oil rich nations (OORN) are the one making a bounty and raking in the moolah.
All this has happened in the last 9 years when crude oil prices have risen from $10 a barrel to $140 a barrel. The demand and supply fundamentals which have been tight form so many years have come to the forefront of every news paper and info vendor. Looking at various demand and supply forecast one can only make out that the prices are headed higher from every point. But does all this demand and supply, including the politics explain the change in price of such magnitude.
There have been oil shocks of this magnitude previously. The current economic scenario looks like a repeat of 1970. However the oil price shock had abated at precisely the time we are experiencing currently. There is a strong correlation between oil spikes of 10% or more with a recession in the US. Have a look at the following graph.
In order to understanding where we stand in the demand and supply, it is important to note that the demand for oil is inelastic up to a threshold price. Determining this price form fundamental factors might be of great interest to some economist. However glancing at price prediction of some industry heavy weights in the oil sector we find that the current price is no where near these estimates. This story can be told later.
There is another important issue. I am not going to discuss the demand and supply figures. Everybody can logon to EIA and the IEA and see what are the 'true' figures. The point is will the crude oil price spiral lead to economic bust. The painful answer to this question in 'Yes'.
Consider these facts about some demand sectors. Lets take up the automobile fuel consumption. The world average of crude oil demand per capita per annum is at $9. At this pace the mammoth western energy eaters eats up nearly half of the world's oil. The car density or cars per 1000 people is very high in countries like US and Canada to the tune of 700 for every thousand. For EU-27 its nearly 450 with some countries having 500 for every 1000. China has the 40 car for every thousand and India 10 every thousand. At current demand rates the oil for demand as measured in the terms of price at $140 is in excess of $1 trillion. However I don't buy the fanciful argument of 'investment banks' that the emerging economies will mimic the demand pattern of the western world by some 2020 or 2030 because there wouldn't be that much oil left. If we analyse the other sectors the demand figures will become so grand that it would be difficult to match supply. At these astronomical demand needs and given the threshold price elasticity the price is bound to go up.
Now this raises a question that whether the price shock should be so severe that it takes the price from a odd $12 per barrel to $145 per barrel. I feel the price rise is exaggerated by market participant to some extent. But the numbers are supported by huge demand figures as well. in the last half a year there has been a reported demand destruction of nearly 2 million barrels and an addition of nearly 800,000 barrel a day of supply. If we scan the history we find that the previous oil spikes came to a halt after the US economy plunged into recession and world economy experienced a slowdown. Although it is happening again it would start getting intense and the slowdown probably wouldn't be a temporary one if price don't fall back to $100 a barrel. Looking from the demand elasticity and working up some numbers, $155 seems an important level where demand will be effected as we reach that price. One may argue that $10 from $145 wouldn't make much of a difference but in reality it does. If price run up $10 from here there would be a very swift reaction in emerging economies like India, China, Indonesia and others. The general consumption would be exposed to further higher prices and would destruct demand on an already inflationary fragile economic setup. This would destruct demand gradually.
The previous oil price shocks saw prices plunging back to the levels they started to climb from. It can happen this time as well. But at that time the demand pattern was much more localized into the western world than it is now. Presently there are huge demand drivers like China, India and even the gulf is eating up large amount of oil. The infrastructure development in Gulf is mind blowing and Asian countries are not far behind. So the long term price inelasticity still stands tall.
Stock market pundits have been seeking a recovery in the markets as and when the oil prices abates. The Federal Reserve is now expected to raise rates by the end of the year with ECB keeping the rates constant. This would lead to a stronger USD and weaker commodity prices which would induce investors back to the equity markets. The 'fanciful' equity markets.
There is a major flaw in this argument. Even if USD strengthens and commodity prices come down, it would only be a temporary shift in price uptrend. The basic economics behind the demand for food grains and energy is driven by addition of 2.5 billion people in the last 20 years to the world population. At this rate the demand is bound to go up exponentially. So any fall in commodity prices would be temporary unless there is huge demand destruction before prices plunge. This means the world should have a phase of slow growth over the next few years in order to have economic balance over longer period of time. The present scenario in no sense can be compared to a 1990 style recovery. We do not have cheap resource sector and lower inflation levels with cheap credit. The way out of the present scenario is a slowdown and some serious demand destruction which is already underway.
Another deeply debated topic for crude oil is the role of speculators. Although one cannot rule out the possibility of mass hysteria that builds around all violent price rise, the oil market seems far from an oil price manipulation cartel. The only cartel is the OPEC itself and is supplying the oil it can. If we consider the futures market to be the reason behind the rise in oil price than it doesn't fit one important aspect. Why is the real demand still holding on? If prices were indeed manipulated in futures markets than a commodity which has no futures contract traded on an exchage should see low volatility if not low prices. But take the case of onions.
A latest article on onions read like this - ( link - http://money.cnn.com/2008/06/27/news/economy/The_onion_conundrum_Birger.fortune/index.htm)
The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.
And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.
The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place.
"There probably has been more volatility since the ban," says Bob Debruyn of Debruyn Produce, a Michigan-based grower and wholesaler. "I would think that a futures market for onions would make some sense today, even though my father was very much involved in getting rid of it."
Now does all the above arguement support the fact listed in the beginning of this article. The answer lies in the alternative to oil. But can we find and alternative to Crude oil ? The answer is in the deep black/dark gray stone called oil shale. It is a kerogen which is found in huge quantity in earth which would turn to oil in millions of years. What we can do now is expedite that process using high temperature process. Back in the 1980's with the middle east oil crisis born the oil shale experiment. When crude prices fell below $25 most of the companies shelved there plans for tapping this resource which is speculated to have 500 billion barrels of oil in the US alone. There are huge untapped region in Africa as well which can last for hundreds of year. Shell being one of the biggest oil major and a avid R&D power house has spent millions if not billions on getting oil from shale and tar sands. There are about 200 patents for shale oil and it is building a refinery for the same in US. It would be a first in 30 years. There has been none, even for crude oil for the last 30 years in US. I am a great believer in science and truly believe that in the next 50 years or so energy will become as cheap as sand due to alternate energy development which include nuclear energy and solar energy. Its just the information content of the present race that would have to go up to reach these levels. However there are serious issues of water being wasted in development of alternative energy from biomass and oil shale. The water being used would not be from main conventional water system, but from saline water reservoirs. Still elections are to be won over these issues and it will take time.
We are still a 0.7 type civilization and approaching the type I mark in next few hundred years where our energy needs would be met in a blink of an eye. But a trader can't trade this information and needs to know what will happen on Monday. We can have a view on this using the wave principle which is as beautiful as the music itself. I would be posting some price targets and expected levels of retreat next week.
Comments are welcome.
Think what it can do at $150 oil.
OPEC and other oil rich regions have gathered such tremendous amount of wealth that a shift in the global economic order is imminent. While the world talked about the Asian growth and how it will supersede the western 'first world' in economic prosperity. However OPEC and other oil rich nations (OORN) are the one making a bounty and raking in the moolah.
All this has happened in the last 9 years when crude oil prices have risen from $10 a barrel to $140 a barrel. The demand and supply fundamentals which have been tight form so many years have come to the forefront of every news paper and info vendor. Looking at various demand and supply forecast one can only make out that the prices are headed higher from every point. But does all this demand and supply, including the politics explain the change in price of such magnitude.
There have been oil shocks of this magnitude previously. The current economic scenario looks like a repeat of 1970. However the oil price shock had abated at precisely the time we are experiencing currently. There is a strong correlation between oil spikes of 10% or more with a recession in the US. Have a look at the following graph.
In order to understanding where we stand in the demand and supply, it is important to note that the demand for oil is inelastic up to a threshold price. Determining this price form fundamental factors might be of great interest to some economist. However glancing at price prediction of some industry heavy weights in the oil sector we find that the current price is no where near these estimates. This story can be told later.
There is another important issue. I am not going to discuss the demand and supply figures. Everybody can logon to EIA and the IEA and see what are the 'true' figures. The point is will the crude oil price spiral lead to economic bust. The painful answer to this question in 'Yes'.
Consider these facts about some demand sectors. Lets take up the automobile fuel consumption. The world average of crude oil demand per capita per annum is at $9. At this pace the mammoth western energy eaters eats up nearly half of the world's oil. The car density or cars per 1000 people is very high in countries like US and Canada to the tune of 700 for every thousand. For EU-27 its nearly 450 with some countries having 500 for every 1000. China has the 40 car for every thousand and India 10 every thousand. At current demand rates the oil for demand as measured in the terms of price at $140 is in excess of $1 trillion. However I don't buy the fanciful argument of 'investment banks' that the emerging economies will mimic the demand pattern of the western world by some 2020 or 2030 because there wouldn't be that much oil left. If we analyse the other sectors the demand figures will become so grand that it would be difficult to match supply. At these astronomical demand needs and given the threshold price elasticity the price is bound to go up.
Now this raises a question that whether the price shock should be so severe that it takes the price from a odd $12 per barrel to $145 per barrel. I feel the price rise is exaggerated by market participant to some extent. But the numbers are supported by huge demand figures as well. in the last half a year there has been a reported demand destruction of nearly 2 million barrels and an addition of nearly 800,000 barrel a day of supply. If we scan the history we find that the previous oil spikes came to a halt after the US economy plunged into recession and world economy experienced a slowdown. Although it is happening again it would start getting intense and the slowdown probably wouldn't be a temporary one if price don't fall back to $100 a barrel. Looking from the demand elasticity and working up some numbers, $155 seems an important level where demand will be effected as we reach that price. One may argue that $10 from $145 wouldn't make much of a difference but in reality it does. If price run up $10 from here there would be a very swift reaction in emerging economies like India, China, Indonesia and others. The general consumption would be exposed to further higher prices and would destruct demand on an already inflationary fragile economic setup. This would destruct demand gradually.
The previous oil price shocks saw prices plunging back to the levels they started to climb from. It can happen this time as well. But at that time the demand pattern was much more localized into the western world than it is now. Presently there are huge demand drivers like China, India and even the gulf is eating up large amount of oil. The infrastructure development in Gulf is mind blowing and Asian countries are not far behind. So the long term price inelasticity still stands tall.
Stock market pundits have been seeking a recovery in the markets as and when the oil prices abates. The Federal Reserve is now expected to raise rates by the end of the year with ECB keeping the rates constant. This would lead to a stronger USD and weaker commodity prices which would induce investors back to the equity markets. The 'fanciful' equity markets.
There is a major flaw in this argument. Even if USD strengthens and commodity prices come down, it would only be a temporary shift in price uptrend. The basic economics behind the demand for food grains and energy is driven by addition of 2.5 billion people in the last 20 years to the world population. At this rate the demand is bound to go up exponentially. So any fall in commodity prices would be temporary unless there is huge demand destruction before prices plunge. This means the world should have a phase of slow growth over the next few years in order to have economic balance over longer period of time. The present scenario in no sense can be compared to a 1990 style recovery. We do not have cheap resource sector and lower inflation levels with cheap credit. The way out of the present scenario is a slowdown and some serious demand destruction which is already underway.
Another deeply debated topic for crude oil is the role of speculators. Although one cannot rule out the possibility of mass hysteria that builds around all violent price rise, the oil market seems far from an oil price manipulation cartel. The only cartel is the OPEC itself and is supplying the oil it can. If we consider the futures market to be the reason behind the rise in oil price than it doesn't fit one important aspect. Why is the real demand still holding on? If prices were indeed manipulated in futures markets than a commodity which has no futures contract traded on an exchage should see low volatility if not low prices. But take the case of onions.
A latest article on onions read like this - ( link - http://money.cnn.com/2008/06/27/news/economy/The_onion_conundrum_Birger.fortune/index.htm)
The bulbous root is the only commodity for which futures trading is banned. Back in 1958, onion growers convinced themselves that futures traders (and not the new farms sprouting up in Wisconsin) were responsible for falling onion prices, so they lobbied an up-and-coming Michigan Congressman named Gerald Ford to push through a law banning all futures trading in onions. The law still stands.
And yet even with no traders to blame, the volatility in onion prices makes the swings in oil and corn look tame, reinforcing academics' belief that futures trading diminishes extreme price swings. Since 2006, oil prices have risen 100%, and corn is up 300%. But onion prices soared 400% between October 2006 and April 2007, when weather reduced crops, according to the U.S. Department of Agriculture, only to crash 96% by March 2008 on overproduction and then rebound 300% by this past April.
The volatility has been so extreme that the son of one of the original onion growers who lobbied Congress for the trading ban now thinks the onion market would operate more smoothly if a futures contract were in place.
"There probably has been more volatility since the ban," says Bob Debruyn of Debruyn Produce, a Michigan-based grower and wholesaler. "I would think that a futures market for onions would make some sense today, even though my father was very much involved in getting rid of it."
Now does all the above arguement support the fact listed in the beginning of this article. The answer lies in the alternative to oil. But can we find and alternative to Crude oil ? The answer is in the deep black/dark gray stone called oil shale. It is a kerogen which is found in huge quantity in earth which would turn to oil in millions of years. What we can do now is expedite that process using high temperature process. Back in the 1980's with the middle east oil crisis born the oil shale experiment. When crude prices fell below $25 most of the companies shelved there plans for tapping this resource which is speculated to have 500 billion barrels of oil in the US alone. There are huge untapped region in Africa as well which can last for hundreds of year. Shell being one of the biggest oil major and a avid R&D power house has spent millions if not billions on getting oil from shale and tar sands. There are about 200 patents for shale oil and it is building a refinery for the same in US. It would be a first in 30 years. There has been none, even for crude oil for the last 30 years in US. I am a great believer in science and truly believe that in the next 50 years or so energy will become as cheap as sand due to alternate energy development which include nuclear energy and solar energy. Its just the information content of the present race that would have to go up to reach these levels. However there are serious issues of water being wasted in development of alternative energy from biomass and oil shale. The water being used would not be from main conventional water system, but from saline water reservoirs. Still elections are to be won over these issues and it will take time.
We are still a 0.7 type civilization and approaching the type I mark in next few hundred years where our energy needs would be met in a blink of an eye. But a trader can't trade this information and needs to know what will happen on Monday. We can have a view on this using the wave principle which is as beautiful as the music itself. I would be posting some price targets and expected levels of retreat next week.
Comments are welcome.
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