In this short it is not about any trading setup rather than an opinion if Trump’s infrastructure plan will influence the direction of Oil prices in 2017 and beyond?
First, if we look at the US Oil price we can basically see three phases so far. We will start back in 2014 as oil prices started to plump massively in Q3 of 2014 from around $120/bbl. down to around $50/bbl. by the end of Q4 2014. This was an impressive loss of around 58%!
However, this was not the final depreciation of oil as it started to fall further in mid-2015 below the 11year low of $33/bbl. Beginning of 2016, oil found its current button and started to increase again as it currently trades in a narrow range of around $52-53/bbl. Technically speaking, after US president Trump won the election in November 2016, oil prices broke the significant of $52-54/bbl. ($54/bbl. UKOil ) to the upside as it currently trades in a narrow range waiting for significant driver for either direction. Technically speaking, oil seeks to break out of the narrow range in near future as it creates signs in lower timeframes. Target may be around $60/bbl. as it will face there the next significant . This price target may be the direction oil faces on the technical side for 2017.
Now coming to all the factor that oil influences in terms of price movement and direction.
After the US elections in November, 2016 took place and president Trump won for the republicans to run office as 44th president of the United States, the oil price rushed a couple days from $43/bbl. towards the major weekly of $51.5/bbl. to flirt with that level. Just several weeks later oil formed a narrow range in which it currently trades.
Let us break down the price movement of the oil and the current divers.
We define 3 main drivers as significant for oil development:
- Demand/Supply Ratio and their effect on further oil gains
- Causes of OPEC Output Freeze
- Sector Development causing massively demand for oil
- US Policy plan – Infrastructure and border tax plan by President Trump
In 2015 oil started to recover a little as it also shows our Supply/Demand Ratio stated to fall in the first half of 2015 to stabilize in the range of $50-60/bbl. However, in the second half of 2015 oil turned again and reached its current swing lows after breaking its 12-year low $33/bbl. and reached $27/bbl. During this time, global oil prices continued to suffer from the oversupply (shown in our ratio), the increased signs of a slowdown in the Chinese economy and a devaluation of price in global equity and markets. In 2016 market saw some wide recovery as the Ratio started to swing towards sentiment. Global supply gave hints of declining non-OPEC supply and efforts to alleviate the persistent supply overgorge. This is also shown in our ratio in our main article. Additionally, OPEC stated started to meet for a possible Output Freeze to bolster demand surplus to strengthen the oil price. This will affect many countries as they depend of oil development (eg. Venezuela, Russia and Brazil just to mention a few). (...)
Obviously, we don’t know whether this will happen or not. This analysis could also be wrong. Keep in mind that trading is probably game. Nobody is 100%. With this analysis, we wanted to show you why WE think that oil COULD be supported throughout this year to reach $60/bbl. This is not a guarantee for accuracy and that is will happen.
We hope this article clarified some of our objectives on the development of oil . As always trading is a probability game and nobody is 100%. And please do keep in mind that this is just OUR PERSONAL Opinion.
Have a great Sunday.
Your Secrets2Trade Team