The Energy War and Its Irrational Free Market Capitalists

Posted on Posted in Commodity Markets

oil-pumpThe next two days will be most important in determining Crude Oil’s market direction price. Tomorrow’s EIA energy report anticipates a decline @ -0.471mm barrels. Afterwards, Thursday brings the summary results of OPEC’s meeting in Vienna, Austria.

Will the USA and its OPEC counterparts continue to pump up the volume of energy supplies? Or will they do what most rational free market capitalists do and reduce supplies to attain a more stable price equilibrium with existing and future demand for energy?

Below is a monthly continuation chart for WTI Crude Oil futures. The energy commodity is on its last leg as it has already violated two key support trendiness and it is struggling to maintain support at its current level. The oil price war between North America and OPEC will get bloodier if crude oil fails to hold support at this “Maginot Line” because then we’re not only looking at $30-handles but also $20-handles further out in time.

At these lower levels, some OPEC members will have to tap the capital markets for debt to cover their sovereign budget expenses, keep the populace pacified and ISIS at bay. Their costs of pumping oil out of the ground are low enough to maintain healthy margins, but many still need higher prices to maintain their budgets. In wars, people often succumb to irrational behavior, even capitalists too when it comes to fear and greed. On guard!

 

monthly-crude-oil-12-1-2015
Click to enlarge

 

Leave a Reply

Your email address will not be published. Required fields are marked *