It was just about one year ago that I posted an article on crude oil and I think that Now is the perfect time to update my projection. To briefly summarize my first article, I posted that WTIC had just finished a wave 2 decline and was starting a wave 3 advance, on the yearly charts.
(Elliot wave structure for a Bull Market consists of a 5 Wave advance. Wave 1 up, 2 correction, 3 up, 4 correction, and a final Wave 5th to the top to complete the entire Bull move)
At this time I have concluded that we have just finished a wave 2 decline(Monthly charts) of the larger wave 3 (Yearly charts) advance, The first part of the wave 3 (yearly charts) advance went from 11 Feb 2016 till 3 Oct 2018. An advance of 2 years 8 months in time and an increase from $26.05 to $76.90 or 295% in price. While it has not been confirmed that the recent decline is officially over, the next advance is immediately in front of us and based on the rate of speed we have been going, I would project WTIC above $150, with corresponding retail gasoline prices above $5.00 in the US by December 2021.
Additionally I would like to reiterate my belief that WTIC will trade to $350 ($13.50 retail gasoline USA) before the next decade is over (31 Dec 2029).
I would suspect that some type of war (China?/Iran?) will occur in the during the next 3 years as the charts are indicating a rather strong advance from here. As an example, I recently went to the Kennedy Space Center and learned that when the space shuttle launches it hits 100 mph 1 second after launch and 1000 mph 60 seconds after launch and it continues until it hits 19,500mph, the speed needed for its mission. Oil is going to launch up from here with the same intensity. As we just entered a wave 3 advance on the monthly charts and are still in the mist of the wave 3 advance on the yearly charts, and according to the Rules, Wave 3’s are the most powerful up waves within the Bull Market. I just hope society is prepared. I am currently long WTIC Dec 2020 and Dec 2021 contracts.
I agree oil will go up and cause all kinds of economic problems, unless the USA war machine cedes control of the eastern island region and water ways to china.
The easy low hanging [fruit] Texas oil has been harvested
The industry and nation now relies mostly on shale oil production. With china in the picture oil prices become very complicated and a world wide discussion becomes necessary to fully realize why oil will/might go higher.
Today that easy Texas oil is mostly depleted. However shale oil rode in to the rescue with horizontal drilling. Sand, water, chemicals and endless trucks coming in with supplies and trucks or oil trains hauling oil to refineries. The problem is this tight shale oil does not produce as much diesel, jet fuel, bunker oil etc thus we saw for the 1st time diesel oil instead of almost a waste product actually being less available and more costly. It seems that 70 dollar oil is the magic number for shale oil. . Higher int rates just adds the final straw to many shale oil producers when the supply of credit or commercial paper disappears, at 50/barrel. 50 dollars and no recourse to cheap paper to roll the debt will be the major cause of BK. Even at higher prices shale oil did not pay down the debt, instead they relied on rolling the debt.
Now lets look further abroad. China is getting very obnoxious about the South Seas and Taiwan, threating to sink a couple air craft carriers which the USA navy admits china could do That would be a loss of 10,000 people in a matter of seconds. What would the USA response be, a war with china or with drawl from the eastern region??
Russia has become an ally of china and N korea certainly is an ally of china. If war with china and the USA happens Russia will cut supplies of energy to Europe. This will cause a world scramble for ME oil. Can the USA produce oil for a military war with china?? or would the USA navy pull back and the USA produce for domestic needs???. Would the USA confront china???
If hostilities between china and the USA do happen we will see highs in oil we have never seen before, or planet earth ceases to exist.
I am here to tell you IMHO that much higher oil prices will result in the near future unless the USA cedes military control to china in the eastern region. The USA may not wish to lose 10,000 lives in seconds thus it is possible that the USA might cede military control to china. China will not allow the USA to continue belligerent acts of hostility [according to the chinese view point] in their back yard for much longer.
The Trump trade war is just one more reason for china to push back
Is the USA willing to risk the lives of 10,00 in seconds and a major war, with more air craft carriers at possible risk??
Of course the price of oil, if planet earth survives, will go much higher.
IMHO the USA will be forced to with draw from the eastern region or risk planet earth. China would risk a pre-emptive strike in their back yard which they deem as their rightful territory, sinking a couple air craft carriers and then let the USA contemplate the demise of planet earth.