Commodities

Oil At 4 Month Highs…What’s Next???

Venezuela has the world’s largest proven oil reserves, but the country is in turmoil and has been for years. With little to no investments and US sanctions, analysts think their output will dwindle to less than 1 million / day.

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However, that didn’t stop oil from extended its weekly rally to a fresh 4-month high. Oil did eventually cool of a bit after prices hit a 4 hr supply zone on Friday.

The oil prices remain a supply and demand equation. Oil use in China, the world’s biggest importer, in the first two months of 2019 rose 6% from a year earlier, despite their GDP steadily declining.

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But I think the biggest impact to the price of oil will be what happens with the US-China tariff situation.

We estimate that a full-blown US-China tariff war could reduce global GDP growth by 0.7 percentage points (pp) to 2.8% in 2019. The impact would be greater on China’s growth (-0.9 pp), due to direct trade effects, and on Europe (-0.8 pp), due to indirect trade effects and financial links (see table). US GDP would decelerate by less (-0.4 pp), due to less direct trade effects and indirect financial links.

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Thus, if there is no trade deal, global GDP would decline, leading to a decline in oil demand and end result would be depress oil prices. So what are the levels I’m looking at now, lets go to the charts?

If the oil chart represented a football field,

then my ends zones on the oil chart are the weekly zones below.

Right now the offense (the buyers) has the ball with the opportunity to advance the ball to the the $63 level.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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