With the flattish nature of its action over the past several months, oil seems to have reached a tipping point on price. It’s almost as if the charts are saying that oil either must break up or break down, if long-term trendlines are going to be respected.
Barrons took the opportunity to plump for a downside break last weekend, a prediction I have vigorously argued against in both print media and on-air. But one follower of mine made a very astute observation, pointing out to me that futures markets for crude oil ten years out are ‘predicting’ oil prices almost $20 lower. The disconnect between forwards trading as ‘predictors’ of future price is a subject I spent a long time explaining in my book, “Oil’s Endless Bid”, but worthy of explaining again – And even pointing out one of the great (at least theoretical) investment opportunities which anyone in the world could make.
A very brief overview of the history of financial oil is necessary here. Think back into the days before 1983 when there were no financial instruments on oil. Prices were arrived at using physical trade alone – you delivered crude and cash would change hands. The price that was agreed upon was arrived at by only two kinds of players – those that produced oil and those that used it.
But the market then was extremely biased towards the takers of crude. While oil companies had practically…