The situation with oil is getting worse and worse...
Up until a few days ago I believed oil had a chance of getting back down to 75-95$. It can still get all the way down there, but for the price to get there it would need traditional markets to crash badly. The current production is too low, the underinvestment in production is massive and the oil industry isn't incentivized to drill for new wells. At the same time the problem is getting larger and larger as there aren't enough refineries that can use oil to create other products like gasoline, and many of these refineries can't just take any type of oil and use it to produce stuff. OPEC+ has been consistently missing its targets and is unable to increase production, oil released from the SPR isn't able to alleviate these issues, while a significant supply is lost from Russia, Syria, Libya, Iran and Venezuela due to sanctions, wars or other issues. The recent announcement from the EU that there will an oil embargo just makes the situation worse, while at the same time tensions are getting worse and worse as 1 Iranian oil tanker was 'seized' by the US in Greece, and 2 Greek oil tankers were 'seized' by Iran.
The more oil output that is lost, the worse the situation is getting, despite the fact that we already have significant demand destruction. If oil stayed around 110 while China had big parts of its population under strict lockdown, what is going to happen as it slowly re-opens? At some point things are going to get very ugly and the high oil prices are going to damage the global economy beyond repair, something that will force oil prices to come down. In some of my previous analysis I did mention some of the potential targets for oil, which could be at 200-300$, but for now the key target remains the 2008 ATH at 140-150$. In my opinion the market will take some time to break that level, but the financial melt down won't come until it gets around 250$. If we take inflation into account, the price of the dollar, as well as the growth of money supply and that of the global stock market capitalization, the 150$ peak in 2008 is now close to 200-250$, however the 150$ peak has psychological significance.
As oil is now cheaper than back in 2008-2011, as the market has closed above the 2011 highs and as the structure is very bullish across all contracts is very bullish, the price of oil could go much much higher from here. Gasoline making new ATHs and has turned the 2008 ATHs into support. December contract formed an SFP but not that bearish. The average price of the next five months had a very strong close and there is nothing really bearish to see. Hence my first target for now is 145$, the second target after some consolidation below 145$ is 195$, and the final one where I'd start exiting and potentially shorting oil would be 245$.
The more oil output that is lost, the worse the situation is getting, despite the fact that we already have significant demand destruction. If oil stayed around 110 while China had big parts of its population under strict lockdown, what is going to happen as it slowly re-opens? At some point things are going to get very ugly and the high oil prices are going to damage the global economy beyond repair, something that will force oil prices to come down. In some of my previous analysis I did mention some of the potential targets for oil, which could be at 200-300$, but for now the key target remains the 2008 ATH at 140-150$. In my opinion the market will take some time to break that level, but the financial melt down won't come until it gets around 250$. If we take inflation into account, the price of the dollar, as well as the growth of money supply and that of the global stock market capitalization, the 150$ peak in 2008 is now close to 200-250$, however the 150$ peak has psychological significance.
As oil is now cheaper than back in 2008-2011, as the market has closed above the 2011 highs and as the structure is very bullish across all contracts is very bullish, the price of oil could go much much higher from here. Gasoline making new ATHs and has turned the 2008 ATHs into support. December contract formed an SFP but not that bearish. The average price of the next five months had a very strong close and there is nothing really bearish to see. Hence my first target for now is 145$, the second target after some consolidation below 145$ is 195$, and the final one where I'd start exiting and potentially shorting oil would be 245$.
