Oil: Bullish potential but be careful!
Oil has the potential to continue its uptrend. However, we could see lower prices first.
Since last Christmas, we have seen oil make a comeback.
Last week an important message hit the wires for oil. According to the Wall Street Journal, Saudi Arabia plans to cut oil exports in an attempt to push oil prices to US$80.
The objective is to be achieved by the Kingdom reducing the volume of oil exports. In November last year, the country exported 7.9 million barrels of oil a day, in December only 7.3 million barrels a day. From the end of January, this export quantity is expected to be just 7.1 million barrels per day.
However, we should not immediately euphorically jump “all in”. The target of US$80 is possible, but it is doubtful that the market will directly reach this goal.
It is more likely that the uptrend will be accompanied by multiple corrections.
One of the possible scenarios that could develop is to first start with falling prices before going further up.
LCrudeFeb19 daily chart. Source: ActivTrader
According to this scenario, we should first expect the market to correct downwards and show lower prices. However, the market could find support in the range between US$49 and US$48.
From here it would be a good starting point to continue its bullish trend up to the 59 US$ area.
Written by Daniel Schuetz, External Analyst
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