Question: Where are energy prices headed in the weeks and months to come?
According to one recent news source, the answer is not so clear:
"Predicting where oil prices go from here is a more daunting task than usual. Oil's trading landscape is more littered than ever with the dreaded 'what if' scenarios involving uncertainty over global oil supplies and production, inflation and economic and political instability." (MarketWatch, March 4)
We here at EWI couldn't agree more: Trying to anticipate the long-term direction in oil prices based on a series of unknown, external variables is like trying to toss a straight arrow in the middle of a hurricane. It's doubtful you'd actually hit the bulls eye.
We also believe that with Elliott wave analysis, you stand a better shot. Rather than weighing a myriad of political and economic "what if" scenarios, wave analysis focuses on one thing: The Elliott wave patterns in charts of crude oil. Throw in Fibonacci-calculated price targets and make sure that Elliott's rules and guidelines have been met -- and you have a very objective metric for making a forecast.
For the past three years, our energy analysts have done just that to try and predict the turns in oil prices. Take the summer of 2008 for example.
At the time, crude was rocketing to its highest levels ever -- above $140/barrel. And, as the May-July 2008 news items below make plain, the "fundamentals" experts saw every reason for black gold's winning streak to continue:
- "Oil: $300 Is On The Radar Screen... I don't see any barriers to further price rises." (New York Times) -- AND -- "No End In Sight To Soaring Oil. Few analysts are willing to call an end to crude's rally." (Boston Globe)
YET -- from its July 11, 2008, peak, crude took step one down in a violent sell-off that wiped nearly 80% off its value.
It took an Elliott wave, not a mainstream, foresight to see that top. In the June 9, 2008, Elliott Wave Theorist, EWI president Bob Prechter wrote:
"I am publishing this issue a bit early in order to alert you to an opportunity developing in the oil market. One of the greatest commodity tops of all time is due very soon.”
Then on July 10, 2008 -- one day before the market's peak -- EWI's Energy Specialty Service went on this bearish alert:
“Two key topping indicators are still evident -- extreme bullish sentiment and relentless media attention. Possible third and fourth signs -- volatility and cries for more government regulation of commodity trading -- are nearing their heads… It all points to a very mature uptrend.”
After oil had crashed from $147 to $33 a barrel by December 2008, most media observers again could only see the continuation of oil's bear market. Take a look at these news items from the time:
- "A raft of demand-destructive news...has put oil on a trajectory that cannot be turned around..." (AP, December 2008)
- "Oil futures posted biggest weekly drop since the Persian Gulf War in 1991. The reality is that the oil price bubble has burst." (VOA)
- "Right now, if you look at the way demand is retreating, it tends to predict lower prices. A drop to $20 per barrel is not out of the question." (nj.com)
Yet again, to the surprise of the mainstream trend-followers, oil climbed out of its December 2008 gutter to embark on the powerful rally to the three-year highs of early May 2011.
And take a look at this Elliott wave chart and analysis from EWI's December 2008 Global Market Perspective (some labels have been removed and added for this article):
"Oil has now retraced the entire advance from the January 2007 low through the July 2008 record high. From a technical perspective, the market remains oversold and price is diverging against several key measures, including sentiment, which combine to suggest that the market is in the final stages of the decline."
Three years ago, with oil prices circling a five-year low of $33/barrel -- Elliott wave analysis prompted EWI's analysts to draw a bold arrow pointing crude toward the $100 level it so recently achieved.
And finally, at crude's May 2 rebound high of $114.38/ barrel, the May 2 Energy Specialty Service proposed this bearish alternate wave count:
"On the downside, trading below $106 would lead me to believe that [the recent wave up] is complete and that the wave down retracement is in force."
You can get the latest Elliott wave insights on where oil prices could be in the days, weeks, and even years ahead. Learn more about the EWI service that suits your personal needs best:
Global Market Perspective: Tap into intermediate- to long-term opportunties in crude
Each 100-page issue gives you the independent perspective you need to put your finger on the pulse of every major market in the world. You'll get insightful analysis and specific forecasts for crude oil, global stocks, currencies, interest rates, gold, silver and much more. DETAILS>>
Energy Specialty Service: Comprehensive intraday and daily coverage for the active trader
Get timely and actionable forecasts for crude oil, nat gas and other global energy markets in EWI's most specialized Energy forecasting service. Discover what real-time updates and expert Elliott wave analysis can do for your trading. DETAILS>>