The crude oil value has relentlessly trended lower all 12 months to an unimaginably low value low of $37 of just a few days in the past, falling from $a hundred a 12 months in the past. The extreme bear market has not solely caught many market commentators off guard however has had a devastating influence on a number of major economies which might be heavily reliant on high oil costs similar to Russia, the gulf states, and different emerging markets reliant on their energy sector tax revenues to finance state spending and of course Britain’s very own Scotland that a yr ago was toying with idea of committing social and economic suicide (independence referendum).
The following video aptly illustrates what would have occurred not solely in Scotland but in the whole of the UK during the past 12 months if the SNP separatist fanatics had succeeded in convincing the Scottish electorate into voting for Scottish independence that will have unleashed forces that actually would have torn the UK apart, one thing that the SNP fanatics continue to remain ignorant to at this time, this despite the fact that the oil price collapse of 2015 alone would have collapsed the Scottish financial system fuelling the process for the disintegration of first Scotland and then the rest of the UK.
UK In the course of the Year After Scotland Votes Sure to Independence:
by SaveTheChildren (youtube)
A yr in the past the SNP fanatics have been busy galvanising the gullible masses with a stream of heart tugging propaganda into convincing the Scots to successfully vote to commit suicide by leaving the UK which I liberally warned of the consequences in dozens of articles and several videos on the time of the catastrophe that lay in store for Scotland which would be the polar reverse of the SNP’s propaganda, the truth of which would literally embrace the breakup of first an Independant Scotland and the remaining UK as excerpted below:
Sep 07, 2014 – Scottish Independence Sure Vote Panic – Scotland Committing Suicide and Terminating the UK?
Opening Pandora’s Box of Disintegration, the Balkanisation of Britain
The peoples of the United Kingdom are actually being sleep walked towards the sting of the cliff, most completely unaware of the potentially disastrous ramifications for not simply Scotland however for what lies in store for the remainder of the United Kingdom following a Scottish Independence Yes vote that may break begin the process for ripping apart a 300 hundred 12 months old entity of an United Island of Nice Britain, which as I’ve repeatedly warned of throughout 2014 that a Sure vote would actually sow the seeds for the balkanisation of Britain as this Island would actually tear it itself apart as the status quo of what had been taken as a right would not exist.
A complete host of reports through the previous year illustrate that the approaching Scottish Independence vote has already galvanised agitants proper throughout the UK, for instance blowing on the embers for Cornish independence as they wave their aptly coloured Cornish black funeralesk flag that continues with calls of autonomy actually right at the other end of Britain from the Northern and Western Isles with requires their own devolution from Edinburgh and even calls for their very own parliament that sows the seeds not just for the balkanisation of Britain but also for breakup of an newly Independent Scotland that following a Yes vote would quickly start to disintegrate, as for example the bordering regions would reassert their separate id that has much more in common with the North England than a lot of Scotland, previously identified because the Kingdom of Northumbria that stretches from Edinburgh within the north all of the approach to town of Sheffield in the south.
While Alex Salmond, Scotland’s Nigel Farage repeatedly performs the Scotland is wealthy due to North Sea oil card, what he convientely omits is that a major portion of Scotland’s oil reserves lie within the waters of the Northern Isles (Orkney and Shetland). Many people of the Northern Isles see themselves as having way more in common with Norway than Scotland which given the close to speedy forex, monetary and economic disaster that would comply with independence would be fast pulled towards sharing sovereignty for far higher stability with the likes of Norway that might achieve what it might never have executed militarily, namely expanding its borders and gaining many western north sea oil fields. Though in all chance the Northern Isles would in all probability ultimately settle as changing into a protectorate of the United Kingdom alongside the traces of the Isle of Man.
So if Alex Salmond ‘King of the Scots’ does reach his tunnel imaginative and prescient mission for an Independant Scotland then he will doubtless go down in historical past as the primary and final Prime Minister of Scotland as we understand it right this moment, which effectively means a Sure vote on 18th September will likely be Scotland voting to commit suicide as when the dust settles what remains would be a mere fraction of its current measurement.
Oil Price Crash and SNP Impartial Scotland
Nothing illustrates the magnitude of the potential catastrophe that was the SNP’s economic programme for an Impartial Scotland (I.S.) than its reliance on an oil price properly NORTH of $120 so as to show Scotland into the promised land of milk and honey, the image being painted was of an Independant Scotland (I.S.) of a paradise on earth, not that far faraway from reality then that which the Syrian I.S. paints for the worlds gullible muslims that crave a quick monitor to paradise.
With each dip within the oil price SNP propaganda responded with the price drop being simply temporary as a substitute as we now have seen a 12 months on the financial collapse of an Independent Scotland would have been spectacular even worse then that of Bankrupt Greece. The SNP’s Financial Baldrick-esk Master Plan for an Independent Scotland that was wholly based mostly on reaping enormous rewards from North Sea oil export tax revenues where SNP propaganda had convinced many Scots to Vote to successfully commit economic and social suicide by voting in last Septembers referendum that came close to reaching the catastrophe on the idea of propaganda implying upwards of £9 billion in North Sea oil tax revenues that could be raised to finance Scotland’s budgetary black gap, which in the fever pitch of the marketing campaign had reached the heights of £11 billion in order to exaggerate the diploma to which Scotland could prosper and fill the void left by the withdrawal of the English subsidy that at the moment amounts to £9 billion per yr.
Even the Governor of the Financial institution of England stepped in at the beginning of this 12 months by warning “the Scottish economy was heading for a “negative shock
The issue with SNP financial propaganda is that it was based on a oil price being properly NORTH of $a hundred per barrel, nevertheless a sub $50 oil worth does not just imply that an Independent Scotland would have made half the forecast tax revenues i.e. £3.5 to £5 billion, as a substitute the reality is that an Independant Scotland right this moment would be forced to bear Prices in help of a collapsing oil industry, simply because the UK authorities has stepped in to help the Scottish oil trade to the tune of £1.5 billion. So an Independant Scotland would right this moment have a unfavorable cash stream from North Sea oil of about -£1.5 billion a 12 months and it is that this that illustrates the magnitude of the catastrophe that Scotland solely just missed by a whisker if they’d fallen for SNP nationalist propaganda.
Czar Putin and the Oil Worth
In the meantime the oil value collapse of 2015 has forced Czar Putin to reign his Ukraine and japanese europe army ambitions which all year have remained caught in an holding pattern in Ukraine after last years land grab that few noticed coming but which I warned of on the very begin of what lay in retailer for the folks of Ukraine.
24 Feb 2014 – Scottish Independence Financial Consequences for England, UK, Ukraine 2014, Britain 2016?
Just as an Impartial Scotland, Russia requires an oil worth north of about $a hundred and ten to take care of its state funds and for each $1 beneath $a hundred and ten Russia loses an estimated $2billion in revenue. With crude oil at the moment buying and selling under $50 that’s a a huge revenue loss of well over $120 billion per annum that has plunged the Russian economic system into Recession with the economy wanting set to contract by as a lot as four% that is also bearing the sanctions penalties of the Ukraine conflict that is costing Russia at least 1% of GDP.
While the ivory tower lecturers that permanently beat the drum of deflation, particularly in the wake of the oil price collapse can be properly served to take a look at what has occurred to Russia the place the inflation charge has soared to over 15% as a consequence of the loss of petro dollars that has seen the Russian Ruble grind lower to a 50% of loss of value against the dollar on a 12 months in the past.
So its no surprise that Czar Putin has pressed the pause button on the Ukraine war to most likely wait till the oil worth has recovered to $one hundred, in direction of which Russia has little control over bringing about.
In fact the budgets of nearly every main oil producer require an oil value north of $60 just to interrupt-even. With a number of comparable to Russia requiring a $a hundred+ break even oil worth and what is in giant part sparking the economic migration of tens of hundreds a month out of African oil producers such as Nigeria whose authorities requires an oil worth of $120 to break even.
Oil Price Financial Stimulus
Whilst the producers / exporters are hurting the oil customers / importers are experiencing a oil value bonanza as the worth drop quantities to an effective transfer of wealth from oil producers to oil consumers to the tune of no less than $1 TRILLION per yr, an enormous financial stimulus for the likes of the US, UK, Europe and every different main oil importer that has most likely saved the Euro-zone economic system from re-getting into recession this 12 months.
Oil Demand / Provide Fundamentals
Nevertheless the place China is concerned, its the opposite way round for the financial slowdown in China that has not too long ago been felt in the worldwide stock markets is definitely a significant driver FOR the collapse in oil value. So while decrease oil prices are supporting the Chinese economy, different drivers equivalent to over capability far surpass its stimulus that’s more likely to persist for the remainder of 2015 and into early 2016. So China does not look set to spark a basic turn round in crude oil demand this year no less than.
The recent thawing in Iran / West relations implies the potential for an big increase in the supply of oil out of Iran which has the worlds fourth largest oil reserves and second largest gasoline reserves. Whilst it might take as long as 12 months for Iran to ramp up production of another 500k barrels a day. Nonetheless a extra quick provide increase may come from the discharge of as a lot as 50 million barrels of oil in storage.
While there isn’t any signal that the Saudi’s are about to chop oil production in assist of the oil price in order that they’re higher in a position to finance their very own massive price range deficit which is estimated at $80 billion a yr! However, towards this the Saudi’ have a $seven hundred billion sovereign wealth fund to attract upon. In truth in strategic phrases the Saudi’s could nicely have played an element in engineering the drop in oil prices in response to market share being lost to the US shale oil trade and different non OPEC producers corresponding to Russia in order to slowly but certainly put many competing producers out of enterprise who need a worth of $60 simply to interrupt even corresponding to Scotland’s oil business and plenty of players within the U.S. shale oil trade who today are suffering and slicing again on manufacturing / exploration with many anticipated to go bust, particularly these who’ve borrowed heavily when oil costs have been excessive, but now are unable to service their debt mountains.
The U.S. shale oil production peaked this yr at approx 5.7 million barrels per day and at present has declined to 5.35 million barrels a day and is expected to proceed to decline in response to a sustained low oil value. Subsequently all the market commentators betting on Saudi Arabia to act to boost the oil price are going to be confirmed flawed, as Saudi Arabia is clearly taking part in the long game in very effectively dealing with competing producers.
So on the basis of fundamentals there may be little sign for an end to low costs any time quickly. Which suggests any bottom in the crude oil price is unlikely to spark a return to the likes of $one hundred. More probably to remain caught in a much lower range that this text will seek to find out the worth levels of.
Crude Oil Price Forecast 2015
My oil price forecast for 2015 as a part of analysis of the US Dollar of 14th December 2014 expected the oil worth to trend lower into Mid 2015, targeting a drop from the then approx $60 to a goal low price of $36:
USD / Crude Oil Inverse Relationship Chart
While it is beyond the scope of this evaluation to conduct a forecast for crude oil prices, nevertheless crude oil is clearly in a powerful downtrend / bear market with no signal of an finish to this that in the end targets previous multi-12 months lows along $36. Which implies that the over-riding trend ought to be in the direction of lower oil prices earlier than the crude oil worth bottoms out. This therefore continues to counsel US Greenback strength for a while till such a basing sample starts to materialise which conveniently coincides with my constructing view for the US Greenback strength right into a mid 2015 peak.
The crude oil worth subsequently did pattern slower toward its mid year target of $36, by truly putting in a bottom a number of days in the past at $37.Seventy five (WTIC). Which now implies that the oil price has bottomed. Subsequently this evaluation will seek to find out what comes next for the oil worth for the remainder of 2015 and into a minimum of mid 2016.
Development Evaluation – The last close of $forty eight represents a $10 rally on the final low of $37.Seventy five, while in share terms this is a large 25% on the low. However by way of pattern has not modified a lot for the price chart clearly illustrates that the crude oil value is stuck within a trading range of between $60 and $forty with the most recent close of $forty eight nearly smack bang in the midst of this vary and as the previous multi-12 months vary recommend that the crude oil value could spend a number of YEARS stuck on this vary.
Help AND RESISTANCE – Bear market bottom low lies in the zone $37 to $42. While buying and selling vary resistance lies in the zone $60 to $64.
ELLIOTT WAVE Analysis – The sept 2014 high of $112 was clearly a fifth wave peak that has subsequently ushered in a 5 wave decline to $37 which now implies an ABC correction greater towards $60 to $sixty five. Although as a result of we are in a trading vary then this corrective rally isn’t going to be so simple as an ABC but resemble the messy pattern alongside the highs from 2011 to 2013 i.e. an ABC+ABC best describes what’s going to in all probability pan out. Nonetheless EWT does counsel that the low is in, and that the fast development is greater in the direction of $65. Which is able to most likely be adopted by another downtrend towards $forty two.
MACD – The MACD indicator is displaying significant constructive divergence to the oil price which is supportive of expectations for a trend higher. Total the MACD is supportive of calmer worth motion forward, specifically a trading range.
SEASONAL Evaluation – The seasonal sample is for the crude oil price to development higher into October and down into early December. This supports expectations for the present rally to proceed for another month or so to target $64 before reversing lower in direction of $forty and possibly a check of the $37.75 low before the tip of this year.
US Dollar / OIL – It is commonly taken as granted that commodities tend to have an inverse relationship to the US Dollar by virtue of the fact that internationally commodities are priced in dollars i.e. a strong greenback cuts the worth of a commodities in overseas currencies due to this fact this should, most of the time be mirrored in the worth charts of major commodities such as crude oil. In additional to greenback pricing, the crude oil value has literally collapsed that in times of economic uncertainty (falling oil demand) prompts each flight to security, specifically the worlds reserve currency and acts as a stimulus for the US Economy and thus the US Dollar as a consequence of falling energy prices.
The crude oil value has continued to exhibit a powerful inverse relationship to the US Dollar other than the newest value action which shows crude oil price energy. My long standing forecast for the US Dollar is to marginally weaken into the end of this 12 months from the current stage of 96 towards ninety three.
14 Dec 2014 – U.S. Dollar Collapse? USD Index Trend Forecast 2015
A marginally weaker US Dollar should subsequently be supportive of the crude oil price due to this fact implying a pattern towards the higher finish of its value vary of round $sixty four as well as now in all probability holding the bottom of the buying and selling range at $forty on any corrections.
Crude Oil Worth Forecast 2015, 2016
Whilst it is extremely possible that my unique forecast low of $36 has now been achieved at $37.Seventy five. The over riding message from this evaluation is that the crude oil value appears set to enter into a prolonged trading range of approx $64 to $forty for the following 12 months. Due to this fact my forecast conclusion is for crude oil to pattern larger in the immediate future to the upper finish of this trading vary before turning decrease and to stay inside this buying and selling vary for another yr. The vary might additionally exhibit very brief-time period spikes to outside of this vary i.e. to $70 and as low as $30, though I would expect downward price spikes to be far more possible than upward spikes above $64.
By way of investing, with a sustained low oil value oscillating within a buying and selling vary for a minimum of one other 12 months then this means that the oil sector is going to proceed to contract with many players going bust as a consequence of unserviceable debt mountains constructed up during the increase years. Subsequently it’s going to be tough to seek out the few golden nuggets that buck the development amongst the entire junk so it might be better to wait a yr or so for the mud to settle then take a gamble today. Nonetheless, if one does want to speculate then accumulating positions at the underside of the trading range is probably the perfect technique.
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By Nadeem Walayat
http://www.marketoracle.co.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 25 years expertise of buying and selling derivatives, portfolio management and analysing the financial markets, together with one in all few who each anticipated and Beat the 1987 Crash. Nadeem’s ahead looking analysis focuses on UK inflation, economy, curiosity charges and housing market. He’s the writer of five e book’s within the The Inflation Mega-Development and Stocks Stealth Bull Market collection that may be downloaded totally free.
Nadeem is the Editor of The Market Oracle, a FREE Day by day Financial Markets Evaluation & Forecasting online publication that presents in-depth analysis from over one thousand skilled analysts on a spread of views of the probable path of the monetary markets, thus enabling our readers to arrive at an informed opinion on future market path. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for basic information functions only and isn’t meant as investment recommendation. Data and evaluation above are derived from sources and utilising strategies believed to be dependable, but we cannot accept duty for any trading losses you might incur as a result of this evaluation. Individuals should consult with their private financial advisors earlier than engaging in any trading activities.
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