MarketBullets® CRUDE OIL

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Comment as of December 6, 2024:

West Texas Intermediate crude prices continue to stretch out a “descending right triangle” pattern, an old-school and fairly reliable chart pattern that, if confirmed with a break down below the horizontal line at about $63.64 would be projected toward a target in the $50 dollar zone! These chart patterns are not any kind of guarantee, but they do have a background patter that goes something like this: The buyers have been consistently present at the $63 level since late 2021. Every time the price reaches down to that level, there is enough buying power present to stop the decline and send prices back upward, but each time this “bounce” happens, the sellers are also present in growing numbers. Each time the price rises it encounters willing sellers at a lower price, creating a series of lower highs over time. Finally, if and when the pattern is confirmed as a negative reversal, the buyers are exhausted and the price accelerates lower, with an initial arbitrary measurement of about 50% of the peak to the horizontal line, suggesting a target of $63 minus $30, which is an initial goal of about $33. If the flat line is not broken and the price rises above the $87 level, the pattern is repudiated. This kind of trading pattern has fallen out of fashion, but still has valid usage in a trend-following program. Speaking from personal experience, it is a decent indicator.

Current and accurate quotes on Russian Urals crude oil have become difficult to acquire and verify. The most recent indication is that Urals are trading between $3.00-$5.00 per barrel below Brent. Urals crude oil is considered an inferior crude product with excessive sulphur and limited fractions of high-value distillate. Prior to the invasion of Ukraine and the subsequent imposition of sanctions by the West, Urals were trading in the same range of discount to Brent Crude. On the heels of the beginning of the war, Urals traded more than $20 per barrel below Brent due to sanctions. The volume of movement of Russian Urals crude oil has increased dramatically during the invasion of Ukriane, to the point where it is as if there were no sanctions or transactional restraints. At this point the sanctions have probably cost other producers more than they have cost Russia.

Russian Urals oil deliveries to India continue to dominate, at about 70% of total shipments, but recent payment issues due to banking sanctions have slowed the pace. Turkey remains at 12% and China 7%. The price cap of $60 per barrel set up by the EU, Australia, G-7 (United States, Canada, France, Germany, Italy, Japan, and the United Kingdom) has not been an effective limit, as Urals price has frequently traded above $60 per barrel since July 2023.