Oil Will Go Lower...
The chart above shows the price of West Texas Intermediate oil. We got out of our energy positions near the beginning of June and have only dabbled in energy since, mainly long nat gas.
Over the last week, we saw a nice little rally in oil but tht is now over. Here is what I think will happen with oil until the end of the year:
- Supply remains tight with many OPEC producers not being able to even meet their quotas now
- Russian oil is making it to the market but not as much as before
- Due to a shortage of nat gas and shutting down nuclear plants and anti coal cutting down coal powered electricity plants, there is a shortage of electricity which is leading to political pressure to increase all those fossil fuel and nuclear sources again
- The Purple Predictor, OBV, in the chart above shows the smart money is still long oil
- We are heading into a global recession which will crush demand.
- Oil will head lower over the coming 6 months but in a very sloppy manner.
- The short term increases in demand due to political pressure TO DO SOMETHING about high energy prices will cause politicians to revive demand for various fossil fuels. This will cause short spurts of increased demand.
- But, as the global recession accelerates, the drop in demand from that will overwhelm the increase in demand from 2.
So how do we make money?
- Generally, I still like the long side of nat gas and nat gas companies
- I would like to buy uranium companies but I think that trade has passed. They are all overpriced.
- Generally, I would lightly trade the short side in oil but on rallies not weakness.