Cool Oil
On November 13, we declared that the Oil was bound for a pullback, a bit novice idea amongst the aggressive talk of Oil above 100. From that day, the price has been lower and higher, but yesterday the price made a new low. On a time scale, it hasn’t been lower since October 25. Even though the OPEC declared that it would not increase production, the prices didn’t manage to move upward on that news. Speculation about adequate supplies being said to be the reason. From a technical standpoint, a support level had been formed around USD 88 and 89, but the price has closed below that level for the last two days, indicating a break of that support.
When we mentioned the cooling possibility of the Oil, we looked at possible reversal or support areas for the bull market. Our estimate was that the first support would be at around USD 87.85. This level is now being tested and a firm close below would indicate a move to the next level which we estimate to be around the USD 80.35 mark.
We are looking at a stronger bullish support around the USD 80 area, but a breach of that support can easily bring us to the USD 75 level. A price range of around about USD 75 is something we’ve not seen since late September, and would mean about 25% decrease in price.
But are we seeing the end of the fuel crises? Sadly, but no. I can not see that a price movement to USD 75 would indicate a further decreases in prices. The support/resistance area after the USD 75 is quite strong and makes an excellent support for a bullish market. I believe that if Oil reaches the USD 75 area, we will be seeing a low being formed, not a continuation of a bear market.
