Oil saga over for now ??

Almost for last eight weeks oil is falling down on Syria tension defuse and positive Iran but simultaneously China is improving hence here is the outlook for Oil. 

Maybe it’s my inner Malthus, but I think there’s something to the idea of ‘peak oil’ – the theory that we have already used more than half the world’s oil reserves and that supply is in decline.

But I don’t know how much oil there is under the oceans, under the Alaskan, Arctic or Siberian ice, or under the sands of the Middle East. I don’t know what some despot in some oil-rich nation is about to do, nor what overseas military intervention is or isn’t about to take place.

I don’t know how much money central banks are going to print, how much inflation or deflation there is in the pipeline, nor how much it will affect oil futures speculation. Nobody does.

This is one of the problems I have with analysing the fundamentals for a market like oil. You could spend your whole life studying oil and nothing else, and still not know everything there is to know about what could affect supply and demand.

That’s why I prefer to base my strategy around price action. And that’s what I want to look at today.

In September, with oil at $107, I suggested we were getting set for a fall to the mid-$90s. This is another call I was lucky enough to get right. It’s now at $96. I could see a good deal of fear and speculation over Syria in the price, but I didn't know that said military intervention was about to be called off.

I based both calls on nothing more than price action. I felt oil was getting set for a run and then I could see there was resistance in the $110-$115 area.

So what do I make of the current price action?

Every year since 2009 oil has been making higher lows. Around $35 in 2009, $67 and then $70 in 2010. In 2011, it was $76. In 2012, $77 and $84. So far in 2013, the low has been $86.

The longer-term trend is definitely rising, though gradually so. And for now I remain bullish over the longer-term.

Over the last three years oil has traded in a range, capped at the $110-$115 area with a base in the $75-$76 area. I’ve illustrated that range in this chart below, which shows oil since its 2009 lows. My $110-£115 target was based on that red band of resistance and nothing more.

Source: StockCharts.com by  Dominic Frisby