Crude Price Expectations | Russell T. Rudy Energy LLC
In a recent article in “Oil Voice”, market watcher, Chris Vermeulen offers his take on where oil prices are headed. With the current price flirting with $40 per barrel, the obvious question is whether we are headed for a major recovery, or back toward recent lows near $26.
Vermeulen’s answer is based partly on technical (trend) analysis and partly on fundamentals (supply and demand). In 2009 the low price for oil was $33.20 and he thinks this is a key level of support for current prices. The fact that prices have recently been below this level is testament to the intense downward pressure exerted by a supply glut and lower than expected demand. Stagnant global economic activity will lead to oil prices testing $30 or below as a floor in the immediate future.
Vermeulen cites the Baltic Dry Index (an indicator of marine transportation activity) as one example of stagnant international economic growth. He also sees the DOW Transportation Index as bearish and vulnerable to a 22% drop. As long as the Baltic Dry Index continues to push new lows, demand for commodities and global exports will likely remain weak. This, in conjunction with continued production of a surplus commodity, will only result in further downward pressure.
Many foreign producers have no alternative but to continue to produce at any price. This exacerbates the glut, and it is even worse when they increase output to offset falling prices, driving them down even further.
Consequently, Vemeulen foresees short term prices fluctuating between $28 and $42 per barrel. Given this volatility, we will be in a trader’s market, and need to be cautious of short-lived price rallies. From April 5 to May 5 he expects a price rotation within a band of $36 and $25. After that, he thinks market fundamentals will determine where prices go, but thinks a high of $36 and a floor of $21 are likely.
Vermeulen concludes, “I expect there to be some big trades around crude oil for both short term swing trades and long term trend trades but the market just is not yet here.”
To read the article in its entirety, please go to http://www.oilvoice.com/n/Crude-Oil-Price-Action-Prediction/14d90a553530.aspx .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
