As shown by the chart, I have projected 3 phases for OIL in the future. The biggest unknown is the time frame exactly each phase will take place.
Phase 1: Oil has a massive short term increase in price due to OPEC+ coming together and agreeing on production cuts. Here's why I think that's going to happen:
There is not a single oil producing nation that can withstand prices per barrel this low in the long term. All of their balance sheets will be significantly damaged if oil prices remain this low, with many companies going bankrupt.
Russia is the country that has agreed to meet up again to discuss production cuts. When OPEC+ disbanded a few weeks ago it was due to Russia and Saudi Arabia not coming to an agreement. Now they are both meeting with one similar goal in mind: to cut production and increase prices. There is only one reason these nations would go back to the bargaining table: to come to an agreement. The only question is how significant the cuts will be.
Phase 2: Although prices will increase from news of a new OPEC+ deal and cuts in supply, the underlying fundamental situation (significant decrease in demand due to COVID-19) will keep prices low for the near term, and the selling will remain strong but not as heavy as the past month. I project this phase to last no more than 2 months from now.
Phase 3: By summer, COVID-19 cases will be decreasing (and or will have already peaked), and businesses will resume normal operations. Therefore, oil demand will increase until it gets back to normal demand levels, probably by fall. This will be a more gradual price increase over a longer period of time. It may take 6-9 months from now for oil prices to reach the levels they were at before the COVID-19 global economic shock.
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Nice analysis, I agree with you completely, it'll just be when this all plays out exactly but the basic synopsis is spot on. I have bought in but will probably sell on the initial run-up and as you say wait till the prices to come down again. I suggest USO Jan 21, 2022, 5 calls
PerryWave
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@danielgwatkin Yes definitely. Those would probably be a sure bet and a good payout. I am also looking to profit off the short term good news of an OPEC deal. I picked up a lot of OTM calls expiring in a couple months and looking to sell shortly after they announce production cuts then either wait for it to go lower / consolidate or roll them into LEAPS that expire around fall at the soonest.
FishyTrades
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I agree, I'm long on HAL looking to tp whenever oil returns to 'normal'
alex_trader_2020
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Everybody knows those scenarios !!!
OPEC & friends knows that is the feelings of
traders !!!
That’s why I will short from now till 15$
alex_trader_2020
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@AlGreco, I told you ....already falll 6% and hoes to the deep where the oil belonged !!
PerryWave
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@AlGreco Hey I’m not sure if it was already made clear by the chart or not but this is a projection for oil over the next few months, not the next hour 🤣. Let’s see how your short positions will be looking after Thursday buddy...BTFO!!
alex_trader_2020
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@PerryWave, I play indraday ... never look tommoriw !!!! crude oil is an Cruel Oil
alex_trader_2020
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@AlGreco, 28 short to 24
And now 24 to 26 long
And tommoriw we will see
Oil is totally unpredictable by any technical analysis !! Why ?? Because all planet need it and only few control it !!!
alex_trader_2020
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@PerryWave, generally I agree that one day will rise to 50-60 till that time we have every day a lot of game !!!!