Iran and other OPEC members want oil to continue to head higher so they can reap greater profits and help recover from the sanctions that have taken such a toll on them.
OPEC meets this Friday, the 22nd and they're supposed to collectively agree to oil output levels, as to whether they'll raise them or hold them where they are, etc.
The world is focused on that meeting right now and it's outcome. And no doubt that will affect oil's price in the near-term and also increase the near-term volatility in oil's price.
However, today, I want to show you where I believe oil goes and why.
There was no doubt that oil needed a pullback near-term and it's gotten a pullback (and depending on what OPEC does, it could get a bit deeper, if they increase oil production.)
But I've been warning my subscribers to expect a pullback in oil, yet for its uptrend to continue. Why did I know a pullback was likely coming? 1) Investors were getting too bullish on oil in the near-term. The news media was way too bullish on it too. 2) The RSI and MACD have been diverging and 3) the price had gotten far away from its red, 200-day moving average. And when that happens, there's always a HUGE chance that it (or any other asset that does the same) would pull back.
Why Oil's Long-Term Rally Isn't Finished
Why do I believe oil will continue to head higher overall (even if it pulls back more near-term)?
Firstly, Elliott Wave counts showed that it's a-b-c downtrend came to an end in early-2016. So its new uptrend had also begun then (and trends last a good while...it's why they're called trends). So I knew oil would have a long recovery.
Secondly, the global economy (while not clicking on all cylinders) was beginning to click along much better than it was at its worst levels. Therefore, the renewed demand relative to supply would cause oil to continue to rise.
Thirdly, the blue, 50-week moving average had gone from trending lower to trending higher. This moving average doesn't change directions all that often. It tends to head in one direction for years, as you can see on the 10-year chart below.
Fourth, the Elliott Wave counts in the uptrend show that we're no where near wave 5 (which would be the final "up" wave in the overall uptrend). We're likely still in the latter stages of wave 3.
Fifth, the weekly chart's RSI and MACD continue to trend higher and so far aren't showing any signs of diverging lower away from oil's rising price, overall.
So we probably have a three-wave pullback coming in wave 4 or a five-wave sideways consolidation before going into the final rise of wave 5. Therefore, I believe we most likely will see one of the three scenarios mentioned above. We could see a deeper dip, but ultimately, the trend higher should continue on until we're nearing the end of wave 5, which should be well within the black box of resistance. So I believe oil minimally makes it to the $80-$100 per barrel mark and could go much higher, before its all said and done.
Oil tends to rise until it stalls out the economy. (And that's why Trump would like to stall oil's rise). If oil could just hang out between $60-$75, it would be ideal for the economy's sake. It would be high enough to where our oil drillers could make money but not high enough to stall out the economy. However, that's what would happen in a perfect world...and as you know, we don't live in one of those. So what tends to happen, more times than not (over the past couple of decades) is that oil tends to rise until it turns the economy southward and kills off (high) oil demand.
In 2005, it took around $145 per barrel oil to kill the economy (and that almost killed the global economy). The next time oil stalled out due to the economy being soft, it only took $112-$114 per barrel oil. Our economy is still fragile. So it's possible that $90-$100 or so could stall it out this time around.
So whether the OPEC news drives oil down to $50 (near-term) or if it doesn't shake it up at all, I believe ultimately that oil is on its way to the $80-$100 per barrel range, if not a bit higher. And between higher oil prices and rising interest rates, it will likely be a one-two punch that knocks out the economy and sends it into its next recession.
I'd love to hear your thoughts. Chime in, below!