The Oil Market [1/3]
I will explain my opinions and analysis of the Oil market, and it's stance in 2016 in this article. This report was requested by @wwworld4us, and I like to write about things that my audience wants to hear so if you have a topic request, feel free to ask in the comment section.
The Oil Market
Now first let's see how the Oil market works. The big Oil players are: USA, OPEC, China and Russia. Everyone has their own interests, obviously to make the most profits, either by selling a lot of Oil, or by selling at high prices or a combination of it, at the optimum price.
We are constantly being told that the Oil reserves are running out of Oil, but I personally think that is a lie, new Oil fields are being discovered in oceans frequently, so I don't think this is an issue.
Then we know that the Oil price is largely denominated by the USD, and since the Nixon Shock, the Dollar is a fiat currency, no longer backed by gold, but by Dollar, gaining the name of PetroDollar. So there is an interesting relationship between Oil, USD and Gold, more on this later.
Now in 2015-2016 we see interesting developments in the Oil market. On one hand Venezuela, one of the biggest Oil producers in bad shape, while there is war raging on in the Middle East, these are both bullish on the Oil price since the demand is restricted.
But on the other hand an expensive Oil is not good for the US Economy, since it weakens the USD (an added burden after the FED money printing). So you have the US with a huge debt, that cannot be paid off, but only inflated away. The FED Dollar printing weakens the Dollar, so it's absolutely crucial for the US to not let the Oil price rise, because 1 burden is big enough but 2 are catastrophic.
We also see the OPEC massively increasing Oil production (probably to pay off their own debts with the profits since everyone has debt). We also see that Iran might increase their Oil exports, and Russia has become a big player as well, if they finalize the south European pipelines, it will be a huge inflow of Oil to the EU.
Then we also have China, which invests into Africa, and imports directly Oil from there to supply their ever growing economy. So Oil is pretty much oversold.
Therefore basically all macro-economic and geopolitical indicators point to a bearish Oil/USD market. The Oil demand is pretty much stagnant (world economies barely grow to need more Oil, except China and a few), while everyone is producing Oil now.
The big monster is the renewable energy sources which is an ever growing market, so the demand could even fall in the future for Oil, while it is being overproduced, clearly a massive bear momentum.
But not so fast, it all depends on the Dollar. Normally I would be short on Oil, but not this time. Truth is much more subtle in this case, and instead of a bear market, we could see whipsaws.
I will explain everything in the next part of this series, it is a 3 part series, I will explain the relationship between the Dollar and Oil and Gold, some trading strategies, and some forecasting. Stay tuned for the next part!
Disclaimer: The information provided on this page might be incorrect. I am not responsible if you lose money using the information on this page! This is not an investment advice, just my opinion and analysis for educational purposes.