Oil’s Technical Breakout

West Texas Intermediate (WTI) made an upside technical breakout last week of the 2018 high ($66.63) as a higher close this week will confirm further price rise is underway initially targeting 68.85, 69.91, 70.92, 71.93 and eventually 76.43 in the weeks ahead. A series of higher daily lows beginning with the Feb 2018 low of 58.05 confirmed rising demand as global markets begin to move into the seasonal high demand period. However, unlike recent years when US inventories were at surplus when season high demand period arrived, this year US inventories are in a deficit year to date and over 50 million barrels in deficit since one year ago. All this sets the stage for what could be a very rapid rise in oil prices in the months ahead as the global industrial rebound continues and fueled by unprecedented demand from emerging markets.

The largest 7 emerging market’s, E7,  (China, Russia, India, Indonesia, Brazil, Mexico and Turkey) gross domestic product (GDP) was 1/2 that of the largest  7 advanced economies, G7, (United States, Japan, Canada, UK, Germany, France and Italy) in 1995. By 2015, the E7 economies annual GDP was equal that of the G7, and by 2035 will be double that of G7.  It is this dramatic growth of E7 and other emerging economies that will demand more and more of the world’s energy and setting up what could be a global energy crisis beginning as soon as 2025. However, the United States will soon become the worlds largest producer of oil and it will be the United Sates and Saudi Arabia who will be providing the oil and energy resources to the rapidly growing emerging markets.

Video Link to Oil Technical Breakout