The Trend

Oil Prices: Two Ways to Spot Pivot Points

Oil is a fickle beast.

Throughout 2017, oil prices have rallied and stumbled more times than most of us care to remember thanks to global supply and demand issues.

All thanks to supply-demand imbalances, and hope.

However, there are two ways to spot when and where oil could pivot and turn.

One way is to track excessive bouts of fear and greed, simply by buying when others become far too fearful, and selling when others become far too greedy.

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For example, look at what happens nearly 80% of the time when the price of oil hits the lower Bollinger Band (2,20) coupled with relative strength at its 30-line, coupled with Williams’ %R at its 80-line, coupled with a massive dip in MACD.

Shortly after, the price of oil rebounds.

Now look at what happens when the upper Bollinger Band (2,20) is hit, coupled with RSI at its 70-line, coupled with Williams’ %R at its 20-line, coupled with a spike in MACD.

Shortly after, the price of oil rebounds. 

Or, we can buy and sell oil based on changes in the fundamentals of supply and demand.

In January 2018, oil prices slipped again on emerging U.S. production fears.

Fears of repeat “drill baby, drill” mentality from U.S. shale producers that once flooded the market and brought prices down were again becoming palpable.

So, none of us were surprised when oil slipped from a high of $66 to $58.

However, it appears oil prices firmed again, showing signs of a recovery in late February 2018, as crude inventories unexpectedly fell by 1.6 million barrels as net imports fell to record lows, and as exports surged. Analysts had expected a build of 1.8 million barrels.  Inventories even declined at the key storage facility in Cushing, Oklahoma, falling by 2.7 million barrels – its ninth straight week of drawdowns.

In short, inventory numbers were better than expected. 

And as long as we have healthy numbers, it helps to ease fears of oversupply.

Meanwhile, OPEC output cuts are apparently draining excess supply, as well. 

Shipments from the oil group are expected to fall by 300,000 barrels a day. Plus, according to United Emirates’ Energy Minister Suhail Al Mazrouei, “the world is in oil undersupply, not oversupply,” as noted by Bloomberg.

There are plenty of opportunities to be found in the oil pits, you just have to know how and where to spot them.  Using the two methods above may help.

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