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A New Case For $100 Crude

Oil

From the middle of June until the end of last month, crude was in a sustained downward trend that saw WTI futures drop 38% from a June 14th high of 123.68 to a September 26th low of 76.25. That move was not in a straight line, of course, and contained at least half a dozen retracements that looked promising at times, but ultimately turned out to be bear market rallies, consolidation-type moves that set up for more selling quite quickly. I have stayed bearish during that time, but over the last few days, my long-term base case has shifted.

When CL started to bounce off that September low, most were suspicious, given how many false dawns we had already witnessed.  Now, however, a month after that low was hit, this is starting to look like a sustainable rally, both on the chart and in terms of the fundamentals.

From a chart perspective, this looks more like a reversal than just another retracement. After climbing off the low, CL did retrace a little, but over the last few days has bounced back again. That would indicate that an actual low has been formed and if we continue higher and break above 93.64, we will be in the third wave of a bullish Elliott pattern. There is still some way to go to get there, but it looks more likely now than a drop back to $76, not least because the economic outlook had changed.

The change is actually quite subtle, but it improves the outlook for oil demand considerably.

As Q3 earnings have come in, a pattern is…





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EXXON Mobil -0.35
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