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Oil May Be Crashing, But Don’t Panic Yet

I am not a big one for sticking to your guns. Consistency that borders on the intransigent may be a good and rare trait in a politician, but there is a reason that there are very few traders who think like that. It is because the ones who did have already gone broke. It is important to remember, though, that in every financial market everything looks most offered at the bottom, and most bid at the top. Oil certainly looks offered right now as we test the lows levels that date back to 2009 and it is hard to find a reason to stick to a bullish outlook, but despite that, this is one time when I am going to stick to my guns. In fact, if you’ll forgive the mixed metaphors, it may be time to double down.

I have been saying for a while now that once the $62 resistance held to the topside in WTI and we started to head downwards, a test of the lows looked almost inevitable. If I am honest, I fully expected it to stop short of the actual low, but that hasn’t been the case. Overnight and early Friday morning, WTI traded below $42, at levels that have not been seen since 2009. Now I know the oil supply situation has changed since then with shale wells going into production, but global demand has also increased.

To logically justify oil at these levels in the long term, from a logical perspective, you have to believe that the global outlook for oil demand is at least close to what it was then. I don’t. I did take a step closer to that belief this week when…

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