Dear David,

I can’t see why in terms of fundamental oil itself, but the chart looks really like it’s going to shoot up, don’t you think?

Its got that look about it. And from what I’ve seen with oil over the years, sometimes, fundamentals are irrelevant.

Cheers

Dear David,

I can’t see why in terms of fundamental oil itself, but the chart looks really like it’s going to shoot up, don’t you think?

Its got that look about it. And from what I’ve seen with oil over the years, sometimes, fundamentals are irrelevant.

Cheers

David Fuller's view

Yes, that can happen, and to quote Benjamin Graham:

 “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

However, in response to your opening question, I think crude oil is unlikely to shoot up without some major production disturbance, although it could grind a little higher, which is what I have been saying for some time. 

Crude oil (weekly & daily) has been only moderately strong among commodities, having mostly ranged since last June and temporarily firmer since December, following OPEC production cuts.  While it shows a slight overall upward bias since mid-2016, the daily chart shows bigger daily moves to the downside, not the upside.  This would probably change if oil was going to move higher. 

Crude oil is paying the price for its years above $100 a barrel, which has encouraged more efficient usage and a switch to natural gas, where possible.  More importantly, renewables led by solar and wind have narrowed markets for oil, which is increasingly regarded as a pariah fuel due to pollution.  This is increasing the development of electric cars and their batteries.   

Last but not least, the world will be awash in shale oil for decades to come. See Ambrose Evans-Pritchard’s article, posted below, on production and reserves at the Permain Basin in Texas.