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Special Series
Why Oil Prices Change
For more reading on why oil prices change -- and why they don't, please read all parts of the series.
Part I, Part II, Part III
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When reporting
on why oil prices change, the mainstream media usually point to a cause-and-effect relationship, such as the example below. But you might be surprised to learn that when it comes to what affects the price of oil, there is a method of forecasting oil prices that is totally independent from the latest media headlines.
Tuesday, May 6 (Bloomberg):
"Crude oil rose to a record $122 a barrel in New York on threats to supply in Nigeria… and growing Asian fuel consumption."
Four days earlier – Friday, May 2 (EWI's Energy Specialty Service; emphasis added):
"For the near-term, you certainly want to keep an eye on the bullish prospects [for crude oil]. Again, we're going to look for a five-wave move up early next week, a pullback, and another leg up."
A militant attack on the Nigerian oil station happened on Sunday, May 4. The report projecting strong demand for oil from China came out on Tuesday, May 6. However, EWI's Energy Specialty Service made a specific, bullish forecast for oil last Friday, May 2.
Question: So how in the world did our Energy Specialty Service analyst know about those events two days in advance?
Learn what’s really behind why oil prices change. Collective mood of energy traders changes them. EWI's Energy Specialty Service can show you now where oil is likely to go next.
Answer: He didn't. And, more importantly, he didn’t need to. Steven Craig, EWI’s Energy Specialty Service analyst, made a bullish call for crude oil last Friday (May 2) for reasons that had nothing to do with supply and demand.
How did he do it, then? Elliott wave patterns in crude oil charts were predicting another push higher, which showed Steve that crude oil traders were in a bullish mood. That's it.
Watch Steve Craig explain some of the reasoning for his bullish call in this free video clip. (Full video available online now inside Energy Specialty Service.)
OK, but what about news stories, you may ask? Don't they have any effect on the price of oil? Sometimes they do in the short term, and many times they don’t. But our analysis suggests the news is rarely – if ever – a factor in the long-term trend in oil prices.
Had the oil traders been in a bearish mindset this week, most likely they would have sold oil regardless of the bullish news. And then you would see something like this in the headlines: "Oil Falls: Traders Brush Off Nigeria's Supply Scare And Focus On Slowing Global Economy…"
Find the latest forecasts for ICE Brent, NYMEX Crude, Heating Oil, Unleaded Gasoline, Natural Gas and Propane inside EWI's Energy Specialty Service now.