Here is the "technical stuff". As I said at yesterday's luncheon, we are now in stage 4 of the rebound stage for this oil cycle.
From JFDBrokers at 7:32 AM ET
WTI traded lower during the European morning Thursday, but the slide was halted by the crossroads of the 71.15 support line and the lower end of a rising wedge formation that’s been containing the price action since the last days of March. The broader trend remains positive, marked by an uptrend line drawn from the low of the 30th of August. However, the fact that the bears are now flirting with the lower bound of the aforementioned wedge make us cautious that a corrective phase may be looming for now.
A decisive break below 71.15 is likely to confirm the downside exit of the wedge and could initially aim for our next support level of 70.45, marked by the low of the 15th of May. That said, we would like to see a clear dip below 70.20 before we get confident on larger declines. Such a dip could open the way towards the 69.30 hurdle, defined by the inside swing peaks of the 24th and 30th of April.
Looking at our short-term oscillators, we see that the RSI turned down after it hit resistance at its 50 line, while the MACD, already below its trigger line, has just obtained a negative sign. These indicators reveal downside momentum and increase the likelihood for WTI to break the lower end of the wedge.
On the upside, we would like to see a clear move above 72.80 before we start examining the resumption of the prevailing uptrend. Such a break is possible to initially set the stage for the 73.65 zone, a resistance marked by the inside swing low of the 19th of November 2014.
Oil Price - May 24
Oil Price - May 24
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - May 24
Rebound Stages for WTI:
Stage 4:
Ceiling : $74.82
Floor: $67.06
My SWAG is that WTI will flop around in this range until it is crystal clear that demand for refined product made from oil exceeds supply. That should happen this summer.
An important point made during Q&A yesterday (May 23) in Houston is that well level economics are as good or better today at $70/bbl than they were in early 2014 at $100/bbl oil. Completed well costs are much lower and netback oil prices (revenues less all cash expenses) are higher.
I am using $65/bbl WTI in all of my forecast/valuation models and they show outstanding Q2 EPS and operating CFPS numbers for all of our Sweet 16.
Stage 4:
Ceiling : $74.82
Floor: $67.06
My SWAG is that WTI will flop around in this range until it is crystal clear that demand for refined product made from oil exceeds supply. That should happen this summer.
An important point made during Q&A yesterday (May 23) in Houston is that well level economics are as good or better today at $70/bbl than they were in early 2014 at $100/bbl oil. Completed well costs are much lower and netback oil prices (revenues less all cash expenses) are higher.
I am using $65/bbl WTI in all of my forecast/valuation models and they show outstanding Q2 EPS and operating CFPS numbers for all of our Sweet 16.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - May 24
Stage 5:
Ceiling = $82.58
Floor = $74.82
Ceiling = $82.58
Floor = $74.82
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - May 24
You can see the ceilings and floor oil prices for all 7 stages of the Rebound Phase on slide 3 of my last podcast, which can be viewed on the EPG website home page.
Note that the stages were set mid-2014 to early-2016, so their s/b an inflation adjustment.
Note that the stages were set mid-2014 to early-2016, so their s/b an inflation adjustment.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group