14th November - Oil set to follow Gold much lower
17 November 2014
TECHNICALS:
Monthly continuation chart
The Oil market has two supports of consequence:
the diagonal support currently at about $85
and the $40 support from the Prior Highs in 1990,2000 and 2003.
Weekly chart
Note the critical current levels - the pivotal lows of 2011 and 2012 , if they are broken will signal the completion of a long-standing top formation, and act as powerful resistance on any attempted rally thereafter.
The bears need this weekly close beneath 75.15.
(NB that this means a break of the major 50% Fibonacci retracement support as well)
Daily
The March 2014 contract has some short-term levels to add those of the weekly and monthly continuation charts.
The breakdown through the Prior Low 82.73 has been an important catalyst in the recent sell –off... And now is powerful resistance to any attempt to rally.
Note this attempted rally back through that level and its failure.
FUNDAMENTALS:
The slide in oil prices began in early July as new concerns emerged about the strength of the Eurozone economy. Additionally, the outlook for Japan’s economy darkened and growth indicators in China, a large energy consumer, continued to undershoot expectations.
And although US Q2 GDP enjoyed a strong recovery from the week Q1 GDP report, there were concerns about the Fed’s stated intention to begin the taper policy intended to end its long running QE3 stimulus.
But what really appears to have undermined the oil price in the second half of this year was a growing perception, since confirmed by OPEC et al, that supply has out-stripped demand.
Add in the fact that the US has moved from historically being the world’s largest energy importer to the world’s largest oil producer, curtesy of the shale oil/gas boom there, and the dynamics for so long shaping the oil price have clearly changed.
But as prices fell Saudi Arabia has refrained from reducing output as a means of raising the oil price. It seems intent on forcing the oil price down to a level where shale production becomes un-economic.
While this may not deter the US, which has for a long time sought a means of achieving energy independence, it could impact on the extraction plans of other countries. Apart from the US, large shale deposits have been discovered in many other countries, and Russia is thought to have the world’s largest shale reserves, so far un-tapped..
Clearly if every country with reserves developed them, the oil price would collapse and leave OPEC a problem. For an area with little or no industry, but with populations used to oil wealth, a price collapse would cause serious problems that would probably be more than just economic.
The Saudi oil minister recently said the demand for oil should pick up in 2015, implying the price would recover, but if it does that would surely encourage other countries to extract their own shale oil.
We judge the Saudis and other OPEC members are prepared to accept a lower oil price in order to keep shale in the ground and retain some control of the Oil market.
But how low can oil go? And what about the conflict in the Middle East where the terror group ISIS are now calling for attacks in Saudi Arabia?
We judge this only makes the oil price look even more bearish and heaven forbid, if ISIS gained widespread control of yet more oil-producing regions, what would they do? Leave it in the ground? No they would try to sell it to fund their terror activities and probably at a discount on the black market.
In summary, we judge the advent of shale oil extraction has proved a game changer. It will herald a period of lower oil prices particularly as this also coincides with several large economic areas suffering recession or material economic under-performance.
Can oil prices go lower? Absolutely they can.
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22nd Nov - Wheat Still Trying to Recover 
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7th November - Gold has gone