Prediction #6 – The Price of Oil Will Surge 50% On Weaker Dollar in 2019

Prediction #6 – The Price of Oil Will Surge 50% On Weaker Dollar in 2019

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2019 is nearly here, and that means it is time to roll out my ten predictions for the new year.  As I did last year, I will start with number 10 and work our way up to number 1 over the last month of 2018.   Enjoy!

Prediction #6 – The Price of Oil Will Surge 50% On Weaker Dollar in 2019

Oil prices hit a peak price of about $76 in early October, but since that time the price has plunged nearly 42% to around $44 per barrel. Don’t count oil out in 2019 because it may rebound to about $65, an increase of 48%. Should that happen one can blame a weak dollar for the rise. We noted the dollar was likely to weaken in 2019 due to a Federal Reserve putting a pause on interest rate hikes.

The Dollar

Oil and the dollar have a highly negatively correlated relationship. Since 1986, the correlation between the two is negative 0.75 with an R^2 of 0.57. Should the dollar weaken, it is likely to result in the price of oil surging in 2019.

Chart

Technical analysis also suggests that oil prices are oversold and likely to rebound next year. Oil has hit a critical level of technical support at $42, and should that level continue to hold it may result in a reversion in the price of oil to its long-term uptrend to around $65.  Oil cut through all other support levels on the way lower in October and November, and that would suggest those level are not likely to act as resistance on the way back up.

oil

Supply and Demand

According to IEA world oil demand hit 99.61 million barrels/day in the third quarter of 2018. That was its highest reading since 2014. The problem was that oil supply also at its highest level at 100.9 million barrels/day.

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(IEA.org)

IEA is also projecting oil demand in 2018 to rise by 1.3 million b/d, and for it to increase by another 1.4 million b/d in 2019. Meanwhile, non-OPEC supply is forecast to fall 1.5 million b/d down from 2.4 million b/d in 2018.

All in all its setup what could be a bounce-back year for oil and prediction #6.

Photo Credit Via Flickr

Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future results.

predictions, oil, 2019, stocks

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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.