Financial analysts fall into two broad, very broad, categories. First, there are the fundamentalists like myself, whose forecasts reflect their reading, their correlation of facts with data points,and that certain cynicism grown from long experience. Second, there are the technicians or chartists, whose forecasts reflect their ability to read many highly technical graphs. While I don't rely on technical analysis, I do follow it.
The technical analysis for oil prices currently looks pretty grim. Take a look at this graph:
The technical analysis for oil prices currently looks pretty grim. Take a look at this graph:
It has broken out of its channel to the downside and attempted a recovery but failed miserably. When it hit the bottom or green line and turned back down instead of piercing the line, technicians conclude that oil has not yet found a bottom yet.
A fundamentalist will also look at supply and demand factors. It takes either a decrease in supply or an increase in demand or some combination to cause prices to increase. It is hard to see an increase in demand without China growing much faster. At first, supply could decrease with the "shutting-in" of wells used for fracking. Because that process takes a very long time and because it would hurt the U.S. more than any other country, that is not a significant price-mover for oil. With the strong probability of Iranian oil coming back on the market, I suspect the supply of oil can only increase, driving down the price per barrel.
Oil company stocks will be attractive buying opportunities . . . but now yet.
