Crude oil continues to trade in its ‘Triangle’
on October 30, 2010

Brent Oct10.pngAn unnatural calm continues to dominate crude oil trading. Prices may move up or down by $2/bbl or $3/bbl a day, but then they always return to where they started, between the upper red line and the lower green one.
The blog has kept its promised eye on developments, since this trend of ‘trading in a triangle’ was spotted by Petromatrix last month. It also applies, as the chart above shows, to trading in the Brent oil contract in euros/bbl. And it has continued even with the US Fed’s QE2 Lifeboat policy about to start.
Thus there is still the potential for the sharp move, up or down, that technical theory would suggest, if either bulls or bears finally come out on top.
One of QE2’s major aims is to drive down the value of the US$, and increase inflation. And in turn, of course, this is supposed to force investors into chasing so-called ‘riskier’ assets. Thus they should buy commodities such as crude oil, as a supposed ‘store of value’.
The interesting thing, however, is that this promised vast flow of liquidity has indeed pushed up equity markets, and some commodities. But as the triangle shows, its positive impact on oil has been balanced by others’ sales.
Crude oil prices were already far too high, of course, relative to either today’s supply/demand balance, or natural gas prices. But they could still have gone higher. After all, as the eminent economist Keynes warned, ‘markets can remain irrational, longer than you can remain solvent’.
So today’s unusual calm in global oil markets, is perhaps trying to send us a message about future developments. The blog will continue to watch, with interest.

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  • Chemicals & The Economy
    November 10, 2010

    Chemicals set for “strong” year-end as oil jumps 7%

    Last week, the blog repeated its warning that crude oil was preparing for a big move, either up or down. And prices then jumped 7%, to a two-year high of $87.49/bbl. So the ‘triangle formation’ proved its predictive power again….

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