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Oil Could Be Primed For Up To 50% Rally, Strategist Says

The price of WTI crude oil could be headed for a jump of between 20 percent and 50 percent, judging from a bullish breakout pattern that suggests a major rally could be coming for an asset, and that has occurred just three times for crude this century, an equity strategist told CNBC this week.

“Crude oil has seen what’s called a golden cross on its weekly chart,” Matt Maley, Equity Strategist at Miller Tabak, told CNBC’s “Trading Nation” program. 

The so-called golden cross appears on a chart when the short-term moving average of an asset crosses above its long-term moving average. The gold cross chart pattern points to a potential for a major rally. 

“That’s only happened three times since the beginning of this century and each of those three times has been followed by a very strong further rally in crude oil, anywhere from 20%-50%,” Maley told CNBC.

According to the strategist, the energy sector looks good if the market holds up and continues to rally. The energy sector has outperformed the overall market by a large margin since last October, even with the pullback since July, Maley also said. If the market holds, energy stocks could do really well in the fourth quarter, the strategist added. 

Despite lingering concerns about the Delta variant, major investment banks continue to be bullish on oil, although not all are as bullish as Goldman Sachs, for example.

Goldman’s analysts kept their forecast for Brent Crude prices at $80 a barrel at the end of this year, although they expect the Delta variant surge to have a transitory drag on oil demand over the next two months.

“Looking beyond the Delta headwind, we expect the demand recovery to continue alongside rising vaccination rates,” Goldman Sachs said in a note in the middle of August.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on August 28 2021 said:
    We don’t need fancy terms like a golden cross on a weekly chart chart to tell us that crude oil prices are already in their way to recouping the losses they sustained in the last ten days and are resuming their surge which I project will take Brent crude to $80 a barrel before the end of the year.

    What is obvious is that the fundamental of the global oil market are very robust underpinned by a global economy growing this year at 6.3% and China’s economy growing at 8.3%. However, the driver for the recent gains by oil prices as in 2020 is China reporting zero COVID cases for the first time in weeks.

    The global economy is now in a position to overcome any new resurgence in the pandemic aided very ably by the availability of billions of vaccines worldwide. A more important factor is a growing confidence in the world that the global economy and humanity can withstand and defeat whatever new variants the pandemic throws at them. This has broken the barrier of fear.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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