Is Oil Doomed?

Is oil doomed long-term? This might sound crazy given all the peak-oil theories out there, but on second thought it might not be so far-fetched. While oil has been trending upwards in price (minus the 2008 crash) since it bottomed in the late 1990s, a new bearish trend might be establishing that might push oil down to levels we thought we would never see again. Oil is still the main source of energy, however, with new types of energies emerging, its not hard to see oil taking a major dive one day. Even if we don’t alter the way we produce energy, oil someday might force our hand for us (when it spikes to unfathomable levels and we have no other choice but to switch to other energies).

Where does our energy come from?

 

 

 

 

 

 

 

 

 

The Chart

I’m not here to make fundamental arguments. I’m not an energy expert or anything close to it (anything above is just speculation). However, I do know charts, and the chart below is saying something.

After making its infamous run to $147, oil has had trouble holding over the $100 level. Anytime oil gets over that level, it cannot hold it. In fact, we have set two consecutive lower highs and thus have put in a new bearish long term trend for oil. The thing to watch now is to see if oil makes a lower low. So far after bottoming out in the mid 30s in 2009, we have set higher lows in the following years. In 2010 we saw a bottom in the high 60s. In 2011 we saw a bottom in the mid 70s.  Will this be the year we break that trend or will we see another higher low?

(Side note: My 2012 prediction for the low for oil was $80)

$CL_F – WTI Crude Oil Monthly Chart 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Here is a ~40 year inflation-adjusted chart of oil. Same trend here.

 

 

 

 

 

 

 

 

 

 

 

Given the major up trend-line break last year (which actually nicely acted as resistance later on) and the new bearish trend, things are not looking great for oil on this bigger time frame. One can now even make the argument that oil is doomed long term.

 

Tags: $CL_F $USO $UCO $OIL $BNO $SCO 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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