Well Oiled

Stock Watch

by Regina Meani

Market analyst Regina Meani looks at the West Texas International Crude Oil price (US$75.63).

Regina Meani 4 October 2021

In our last report on 27 September, we looked at the gold to oil ratio and its possible implications for the gold price. This week our focus turns to the West Texas International Crude Oil price (US$75.63). Our last focused analysis on the Oil price occurred in November 2020 when the price was $45.80 and we suggested that the price had the potential to run into the $60-70 range. The price reached through $60 in March this year where it paused before continuing higher to push through $70 in June to approach a significant zone of resistance in the $75-80 range. The area combines the downward trend line from the 2008 peak and a resistance zone reaching back to 2005.

In the 2020 pandemic decline the price dropped to a low of $9 in April where it pivoted into recovery. Since then, the price has climbed a whopping 735%. In the same time frame gold experienced an initial rise from a March 2020 low at US$1452 to gain a peak price in August that year at $2063 (up 40%) to then fall into a bear market. Taken from the oil equivalent point to point the gold price experience marks a rise of a mere 21% overall.

As the current oil price reaches through into the US$75-80 barrier zone, we find that there are marked similarities to the 2018 experience but the longer-term momentum appears stronger suggesting that a breakaway through this area is possible but may be tweaked by the appearance of some divergence from the shorter-term indicators. This implies that while there remains the potential to breakaway it may be delayed by more price volatility.

For a confirmation of a breakaway in the very near term, we would suggest that the price would need to clear $85. When this occurs, the price would gain the potential to approach $95 and possibly considerably higher as momentum is regained. Over the short term the price may be expected to churn in the $66 to $85 range with these levels providing trigger points. A drop below $66 would indicate a potential breach of the short-term trend allowing leeway on a break of $60 for confirmation of a change in trend.

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