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John Lounsbury, Managing Editor and Co-founder of Global Economic Intersection, provides comprehensive financial planning and investment advisory services to a small number of families on a fee only basis. He has a background which includes 34 years with a major international corporation, 25... More
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  • Oil Makes A Move 0 comments
    Mar 1, 2013 2:16 PM | about stocks: USO, OIL

    Is the headline correct or would "Oil Fakes a Move" be more correct?

    Here is a chart from Friday morning (01 March 2013) shown in an article by Anthony Lazarra (Futures Magazine).

    (click to enlarge)

    In the early afternoon on the same day the chart has moved even lower, down to 90.50.

    Lazarra shows his downside targets around 87 and then 82.

    Other analysts have suggested the low for oil in 2013 could be much below these near-term targets. Dian Chu has predicted $65 (05 December 2012) and Andrew Butter has suggested (in July 2012) even lower ($60). Butter's analysis predicted a price of oil around $100 before mid-year 2013 to precede the drop all the way to $60.

    In October (2012) Goldman Sachs predicted a longer term downtrend in oil. Two months ago Deutsche Bank forecast $70 oil by year end. And Bank of America has predicted $50 sometime in the next two years. The same report (11 December 2012) also predicted an average price of $90 over the same time span.

    The International Energy Agency (IEA) has issued an update today (01 March 2013) that takes a more bullish longer-term view:

    The IEA significantly increased its projections of future oil costs in this year's report due to the changing outlook for demand and production costs. It now expects crude oil to average $100 per barrel over the next two decades and more than $200 per barrel in 2030, in nominal terms. Last year's forecast estimated that a 2030 barrel would amount to only $108.

    The IEA has increased the long-range price outlook by almost 100% over the past year.

    However, the economic impact of energy costs has been continually reduced and that is projected to improve further. The U.S. Energy Information Administration (NYSEMKT:EIA) reports that the efficiency of energy utilization has reduced the energy cost per real dollar of GDP by half over the past 30 years and projects that same rate to continue over the next 30 years. A GEI News report is scheduled on this later today.

    So, are we seeing oil making a move or faking a move? It could be both, depending on your time frame.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: USO, OIL
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