What prices were showing for crude in the first half of 2008 is that there is shortage in oil. But the fundamentals were predicting a recession and lower prices. Prices might be wrong so many time because they are subjective; there is nu ‘right price’. It is all relative to market participants if a security is cheap or not, and they take position (there is sentiment as well, fear missing the rally, etc.).

In 2008, the signals the prices were sending for crude were wrong; from my point of view, charts should be used mainly for confirming fundamentals, but sometime prices are late showing the way.

I’m just able to scratch the surface in my posts! There’s so much more I’d love to highlight but I can’t do so for time and space reasons – readers wouldn’t come back if I wrote a 5 page report per chart

You hit on probably the core of the issue. News is wonderful but ultimately it’s supply and demand that move price. Both of which hinge on funds putting on or taking off positions today for what they think price will be in the future, and there are many forces that contribute to, or destabilize the balance.

As a technician, I tend to focus on price and not so much the reasons why. I try to keep everything into high probability, low risk moves and not so much worry about accuracy (in terms of “I made the right call.”) Over time, edge – developed through price structure – should carry you through.

Though we need the fundamentals to make the moves, those fundamentals are often inherently unpredictable and so that leaves us only to manage risk… such that when we’re right, we make more money than when we’re wrong.

Contango & Backwardation are two topics I haven’t dealt with all that much since I specialize in front-month Dow-Mini @YM futures. I would suggest looking up in Investopedia or just doing a Google search for additional information.

But you’re right – there seems to be all sorts of fundamental and news-related issues that should cause a floor or rally in oil.

great analysis!

So Paul, this is just to remember that any excuse was good a year ago to push prices higher (it was enough to have few Nigerians breaking a pipe to make 3% per day). Today, we have pirates holding huge tankers full of oil just to see prices falling 8% the same day. As Corey says, fundamentals might initiate a move, but everything after is like “Why did we make 5% up today? Ah, oh, I don’t know…wait a sec…oh, there was an explosion in Nigeria; I guess this must be the reason!” No it’s not; it’s psychology and positive sentiment, fear of missing the boat, etc.

We might see soon the same talk back; war in Gaza will drive prices through stratosphere, which is nonsense. There is no oil in Gaza and the recession is picking steam. Remember in 2000, which was a small recession and China was beginning its decade boom, oil went down to 15$ a barrel!!! Were 8 years ago costs for getting oil out much lower than today? I don’t think so. I read that costs for Aramco (that’s the biggest Saudi oil extractor I guess) to bring up a barrel are 4$; now for Canadian sands are higher, I agree. So looking back in 2000, I think going back to 15$ is still possible; it won’t go there probably and float somewhere around here, but lower prices are possible.

just to add a little more positive news for crude
1. Renewal of military activity in Niger River Delta can disrupt supplies
2. China’s top energy official hinted China Might Add to the Strategic Oil Reserve at such low prices

But I also read in a news report that ”the Feb/June WTI contango has been constantly widening and is closer to $8.5 which is not good news for crude” If anyone can explain this it would be great..

thanks

All it would take is a little spark to drive oil back to $50 or above which would put negative pressure on the stock market.