You Can’t Ignore this Crude Oil Boom Forever

It’s running away.

We’re talking about crude oil, mind you.

You shouldn’t be surprised!

I have talked about it for a few weeks now. And, unless something else needs addressing, I’ll talk about it for the rest of the year. I believe this sector could make you a potential fortune. So, it’s worth keeping you on the right side of the trade for that reason.

2014 was a watershed year for the commodity.

Punters lost a fortune into 2016.

That’s when things changed…

Crude has boomed ever since and, despite the bullish price action, the market doesn’t seem to care. But the market can’t ignore the sector forever. When the sentiment changes, I think crude oil stocks are poised to skyrocket.

We might not need to wait much longer…

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The Latest Story

S&P Global Platts shared the latest story on Monday:

Crude oil futures were higher by more than $1/b during mid-afternoon trade in Asia Monday, with ICE Brent crude crossing the $80/b mark on intensifying geopolitical tensions between the US and Venezuela, and a marginal fall in the US oil rig count.

‘This came as Saudi Arabia reiterated at the OPEC/non-OPEC monitoring committee meeting over the weekend in Algiers that the oil market is balanced, and is willing to produce more crude to mitigate supply risks ahead.

‘The US Administration on Friday indicated its readiness to ramp up sanctions on the Maduro regime in Venezuela, which could potentially impact imports of US light oil and refined products by Venezuela, analysts said.’

The Trump administration have been vocal about crude and Venezuela in recent weeks. US President Donald Trump believes crude prices are too high. He claims that OPEC is manipulating prices higher:

Tweet by Donald Trump

Source: Twitter

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OPEC met and confirmed it would eventually pump more production over the weekend. But it’s not in a rush. OPEC has an incentive to keep oil prices higher. CNBC noted earlier in the week:

‘OPEC leader Saudi Arabia and its biggest oil-producer ally outside the group, Russia, on Sunday ruled out any immediate extra increase in output, effectively rebuffing a call by Trump for action to cool the market.

‘”I do not influence prices,” Saudi Energy Minister Khalid al-Falih told reporters as OPEC and non-OPEC energy ministers gathered in Algiers for a meeting that ended with no formal recommendation for any additional supply boost.

‘”It is now increasingly evident, that in the face of producers reluctant to raise output, the market will be confronted with supply gaps in the next 3-6 months that it will need to resolve through higher oil prices,” BNP Paribas oil strategist Harry Tchilinguirian told Reuters Global Oil Forum.’

It’s unlikely that we’ll see a jump in production until years end. OPEC is more likely to make a decision in December, once it’s monitored the effects of US sanctions and a potential decline in Iranian production.

Put simply, fundamentally, crude sounds bullish.

The technicals look good, as well… 

Big Picture

Here’s the latest monthly chart for Brent crude oil ― the international oil price:

Graph of Crude Oil pricing

Source: tradingview.com

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I have warned that crude looks bullish for weeks. Here’s a snippet of last week’s update:

The red channel suggests crude could see a channel shift in the future. It’s currently trading in the blue channel. But it couldn’t breakout during May. It came back to re-test the channel.

‘That could change soon…

‘The bottom line: Brent crude looks like its setting up for a drive to higher prices. I wouldn’t be shocked if crude moves into the $80 per barrel zone next month. Indeed, if we’re correct, you could make a fortune buying the best crude stocks.’

Well, thanks to the latest fundamental story, crude broke through US$80 per barrel this week.

It happened earlier than expected.

Crude oil is now trading above the 2018 high.

That’s bullish.

It’s easy to think it will march to higher prices now…

But, when it comes to financial markets, expect the unexpected. We could see a false breakout. That would shake the bulls, sending the crude price lower in the short term.

Is this a false breakout?

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No one knows for sure.

But, I’m still positive on crude oil. Take a look at the chart again:

Graph of Crude Oil pricing

Source: tradingview.com

[Click to open in a new window]

Crude is putting in a double high, which could suggest a pullback towards support. There’s key support around the US$72 per barrel zone this month. You can see this by looking at the lower red trend line.

I doubt we will go that low, however.

There’s also support at the US$78 per barrel level. That’s shown by the lower pink trend line, which acted as minor resistance into 2014. The lower pink trend line was resistance last week and dates back to 2011, when crude made its highest yearly closing.

There’s a good chance we could see a pull back to this level.

That said, technically speaking, crude oil could march off to higher prices. I’d love to see a monthly closing above the blue uptrend line and the lower pink downtrend line. This hasn’t happened since 2014.

A closing at 2018 highs this month would be tremendously bullish for crude oil. It would suggest an advance to higher prices into years end…

The bottom line: Everything we’re looking at is bullish. It’s difficult to be bearish with this price action. Crude oil is a standout in the commodities sector today. It’s not too late to buy the best crude oil stocks. If we’re correct, the party is just getting started. This is a sector we’ll be looking at closely in Gold & Commodities Stock Trader in the months ahead.

For more details, go here.

Regards,

Jason Stevenson,
Resources Analyst, Markets & Money


Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:


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