Archive for Energy

20 Dec

Brent Oil Under Pressure Again: USD and China in Focus

By RoboForex Analytical Department

Brent crude oil prices fell below 73 USD per barrel on Friday, reflecting ongoing downward pressure. The market is poised to close the week with losses as a robust US dollar weighs heavily on commodity prices.

This week, the US Federal Reserve signalled a measured approach to reducing borrowing costs in 2025, sending the US dollar to a two-year high. The dollar’s strength has raised concerns about a dampened outlook for global fuel demand, particularly in emerging markets where dollar-denominated commodities become more expensive.

Concerns from China add to market anxiety

The ongoing unease about China’s economic recovery adds to the bearish sentiment. Sinopec, the country’s largest refiner, announced that domestic petrol demand likely peaked last year. This revelation has significantly clouded the outlook for 2025 as China’s role as a key driver of global energy consumption diminishes. China’s reduced demand has cast a long shadow over global crude markets, leading to further downward price pressures.

Mixed signals from supply dynamics

Despite the weak demand signals, the supply side has provided mixed indicators. Earlier in the week, data from the US Department of Energy showed reduced oil reserves, temporarily bolstering prices. However, this bullish factor was short-lived. Kazakhstan’s decision to support the extended production cuts under OPEC+ was another potentially supportive signal, but it has failed to provide sustained relief to oil prices amid broader concerns.

The structural expansion of production outside OPEC, particularly in the US and other non-OPEC nations, further complicates the outlook. Combined with China’s declining appetite for energy, these factors suggest that oil prices may end 2024 on a subdued note, with limited prospects for a significant recovery.

Technical analysis of Brent oil

H4 chart analysis: on the H4 timeframe, Brent continues to trade within a broad consolidation range around the 73.13 USD level. The market recently extended this range upwards to 73.40 USD. However, a downward move to 71.93 USD appears imminent. If the market manages to break out of this range to the upside, the next target lies at 75.05 USD, with the potential for further gains towards the 80.00 USD level.

From a technical standpoint, the MACD indicator supports this scenario, with the signal line positioned below the zero level near recent lows. This indicates that the market could soon attempt a reversal towards higher levels, potentially marking the beginning of a new growth wave.

H1 chart analysis: on the H1 chart, Brent is also consolidating around 73.13 USD. The current wave structure suggests a decline towards 71.93 USD, followed by an expected corrective wave to return to 73.13 USD. If this resistance is breached, the market may gain momentum, with an upward trajectory targeting 75.05 USD and potentially higher levels.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News Forex and Currency News
03 Dec

Brent Oil Prices Dip Ahead of Crucial OPEC+ Meeting

By RoboForex Analytical Department 

Brent crude oil prices have declined to 71.65 USD per barrel as the commodity market remains tense ahead of this week’s postponed OPEC+ meeting, now rescheduled for Thursday, 6 December. The market is concerned about the direction of future global oil supply amid fears of oversaturation. The prevailing expectation is that OPEC+ might delay its planned increase in oil supply for the third time, reflecting persistent supply uncertainties.

Despite these pressures, there are optimistic signals from the oil sector, particularly China, where a resurgence in production activity is seen as a sign of gradual economic improvement in one of the world’s largest importers of raw materials. This development could bolster the energy sector.

The geopolitical landscape remains mixed, with traders closely monitoring tensions in the Middle East. Any escalation could heighten regional instability and affect the overall oil supply dynamics in these areas.

So far, the recent strengthening of the US dollar has not significantly impacted oil prices. However, future market dynamics could shift as global economic conditions evolve.

Technical analysis of Brent Oil

H4 chart: the market is navigating a broad consolidation range centred around the 73.33 level, with recent extensions downward to 71.55. An upward movement towards 73.33 is anticipated today. Should the price exit this range on the higher side, there may be potential for a growth wave targeting 75.15, potentially extending up to 80.00. The MACD indicator supports the bullish Brent outlook, with its signal line below zero but pointing upwards.

H1 chart: Brent has found support at 71.55, initiating a growth wave towards 73.33. Upon reaching this level, a compact consolidation range might form. A breakout above this range could lead to a rise towards 75.15. This potential growth trajectory is corroborated by the Stochastic oscillator, with its signal line currently above 50 and trending towards 80.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
25 Nov

Nuclear rockets could travel to Mars in half the time − but designing the reactors that would power them isn’t easy

By Dan Kotlyar, Georgia Institute of Technology 

NASA plans to send crewed missions to Mars over the next decade – but the 140 million-mile (225 million-kilometer) journey to the red planet could take several months to years round trip.

This relatively long transit time is a result of the use of traditional chemical rocket fuel. An alternative technology to the chemically propelled rockets the agency develops now is called nuclear thermal propulsion, which uses nuclear fission and could one day power a rocket that makes the trip in just half the time.

Nuclear fission involves harvesting the incredible amount of energy released when an atom is split by a neutron. This reaction is known as a fission reaction. Fission technology is well established in power generation and nuclear-powered submarines, and its application to drive or power a rocket could one day give NASA a faster, more powerful alternative to chemically driven rockets.

NASA and the Defense Advanced Research Projects Agency are jointly developing NTP technology. They plan to deploy and demonstrate the capabilities of a prototype system in space in 2027 – potentially making it one of the first of its kind to be built and operated by the U.S.

Nuclear thermal propulsion could also one day power maneuverable space platforms that would protect American satellites in and beyond Earth’s orbit. But the technology is still in development.

I am an associate professor of nuclear engineering at the Georgia Institute of Technology whose research group builds models and simulations to improve and optimize designs for nuclear thermal propulsion systems. My hope and passion is to assist in designing the nuclear thermal propulsion engine that will take a crewed mission to Mars.

Nuclear-powered rockets could one day enable faster space travel.
NASA

Nuclear versus chemical propulsion

Conventional chemical propulsion systems use a chemical reaction involving a light propellant, such as hydrogen, and an oxidizer. When mixed together, these two ignite, which results in propellant exiting the nozzle very quickly to propel the rocket.

A diagram showing a nuclear thermal propulsion system, with a chamber for hydrogen connected to several pumps, a reactor chamber and a nozzle that the propellant is ejected from.
Scientists and engineers are working on nuclear thermal propulsion systems that would take hydrogen propellant, pump it into a nuclear reactor to generate energy and expel propellant out the nozzle to lift the rocket.
NASA Glenn Research Center

These systems do not require any sort of ignition system, so they’re reliable. But these rockets must carry oxygen with them into space, which can weigh them down. Unlike chemical propulsion systems, nuclear thermal propulsion systems rely on nuclear fission reactions to heat the propellant that is then expelled from the nozzle to create the driving force or thrust.

In many fission reactions, researchers send a neutron toward a lighter isotope of uranium, uranium-235. The uranium absorbs the neutron, creating uranium-236. The uranium-236 then splits into two fragments – the fission products – and the reaction emits some assorted particles.

Fission reactions create lots of heat energy.

More than 400 nuclear power reactors in operation around the world currently use nuclear fission technology. The majority of these nuclear power reactors in operation are light water reactors. These fission reactors use water to slow down the neutrons and to absorb and transfer heat. The water can create steam directly in the core or in a steam generator, which drives a turbine to produce electricity.

Nuclear thermal propulsion systems operate in a similar way, but they use a different nuclear fuel that has more uranium-235. They also operate at a much higher temperature, which makes them extremely powerful and compact. Nuclear thermal propulsion systems have about 10 times more power density than a traditional light water reactor.

Nuclear propulsion could have a leg up on chemical propulsion for a few reasons.

Nuclear propulsion would expel propellant from the engine’s nozzle very quickly, generating high thrust. This high thrust allows the rocket to accelerate faster.

These systems also have a high specific impulse. Specific impulse measures how efficiently the propellant is used to generate thrust. Nuclear thermal propulsion systems have roughly twice the specific impulse of chemical rockets, which means they could cut the travel time by a factor of 2.

Nuclear thermal propulsion history

For decades, the U.S. government has funded the development of nuclear thermal propulsion technology. Between 1955 and 1973, programs at NASA, General Electric and Argonne National Laboratories produced and ground-tested 20 nuclear thermal propulsion engines.

But these pre-1973 designs relied on highly enriched uranium fuel. This fuel is no longer used because of its proliferation dangers, or dangers that have to do with the spread of nuclear material and technology.

The Global Threat Reduction Initiative, launched by the Department of Energy and National Nuclear Security Administration, aims to convert many of the research reactors employing highly enriched uranium fuel to high-assay, low-enriched uranium, or HALEU, fuel.

High-assay, low- enriched uranium fuel has less material capable of undergoing a fission reaction, compared with highly enriched uranium fuel. So, the rockets needs to have more HALEU fuel loaded on, which makes the engine heavier. To solve this issue, researchers are looking into special materials that would use fuel more efficiently in these reactors.

NASA and the DARPA’s Demonstration Rocket for Agile Cislunar Operations, or DRACO, program intends to use this high-assay, low-enriched uranium fuel in its nuclear thermal propulsion engine. The program plans to launch its rocket in 2027.

As part of the DRACO program, the aerospace company Lockheed Martin has partnered with BWX Technologies to develop the reactor and fuel designs.

The nuclear thermal propulsion engines in development by these groups will need to comply with specific performance and safety standards. They’ll need to have a core that can operate for the duration of the mission and perform the necessary maneuvers for a fast trip to Mars.

Ideally, the engine should be able to produce high specific impulse, while also satisfying the high thrust and low engine mass requirements.

Ongoing research

Before engineers can design an engine that satisfies all these standards, they need to start with models and simulations. These models help researchers, such as those in my group, understand how the engine would handle starting up and shutting down. These are operations that require quick, massive temperature and pressure changes.

The nuclear thermal propulsion engine will differ from all existing fission power systems, so engineers will need to build software tools that work with this new engine.

My group designs and analyzes nuclear thermal propulsion reactors using models. We model these complex reactor systems to see how things such as temperature changes may affect the reactor and the rocket’s safety. But simulating these effects can take a lot of expensive computing power.

We’ve been working to develop new computational tools that model how these reactors act while they’re starting up and operated without using as much computing power.

My colleagues and I hope this research can one day help develop models that could autonomously control the rocket.The Conversation

About the Author:

Dan Kotlyar, Associate Professor of Nuclear and Radiological Engineering, Georgia Institute of Technology

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Energy Opinions
13 Nov

Countries spend huge sums on fossil fuel subsidies – why they’re so hard to eliminate

By Bruce Huber, University of Notre Dame 

Fossil fuels are the leading driver of climate change, yet they are still heavily subsidized by governments around the world.

Although many countries have explicitly promised to reduce fossil fuel subsidies to combat climate change, this has proven difficult to accomplish. As a result, fossil fuels remain relatively inexpensive, and their use and greenhouse gas emissions continue to grow.

I work in environmental and energy law and have studied the fossil fuel sector for years. Here’s how fossil fuel subsidies work and why they’re so stubborn.

What is a subsidy?

A subsidy is a financial benefit given by a government to an entity or industry. Some subsidies are relatively obvious, such as publicly funded crop insurance or research grants to help pharmaceutical companies develop new drugs.

Others are less visible. A tariff on an imported product, for example, can subsidize domestic manufacturers of that product. More controversially, some would argue that when a government fails to make an industry pay for damage it causes, such as air or water pollution, that also amounts to a subsidy.

Subsidies, especially in this broader sense, are widespread throughout the global economy. Many industries receive benefits through public policies that are denied to other industries in the same jurisdiction, such as tax breaks, relaxed regulations or trade supports.

Governments employ subsidies for political and practical reasons. Politically, subsidies are useful for striking bargains or shoring up political support. In democracies, they can mollify constituencies otherwise unwilling to agree to a policy change. The 2022 Inflation Reduction Act, for example, squeaked through Congress by subsidizing both renewable energy and oil and gas production.

Practically, subsidies can boost a promising young industry such as electric vehicles, attract business to a community or help a mature sector survive an economic downturn, as the auto industry bailout did in 2008. Of course, policies can outlive their original purpose; some of today’s petroleum subsidies can be traced to the Great Depression.

How are fossil fuels subsidized?

Fossil fuel subsidies take many forms around the world. For example:

  • In Saudi Arabia, fuel prices are set by the government rather than the market; price ceilings subsidize the price citizens pay for gasoline. The cost to state-owned oil producers there is offset by oil exports, which dwarf domestic consumption.
  • Indonesia also caps energy prices, then compensates state-owned energy companies for the losses they bear.
  • In the United States, oil companies can take a tax deduction for a large portion of their drilling costs.

Other subsidies are less direct, such as when governments underprice permits to mine or drill for fossil fuels or fail to collect all the taxes owed by fossil fuel producers.

Estimates of the total value of global fossil fuel subsidies vary considerably depending on whether analysts use a broad or narrow definition. The Organization for Economic Cooperation and Development, or OECD, calculated the annual total to be about US$1.5 trillion in 2022. Tche International Monetary Fund reported a number over four times higher, about $7 trillion.

Why do estimates of fossil fuel subsidies vary so dramatically?

Analysts disagree about whether subsidy tabulations should include environmental damage from the extraction and use of fossil fuels that is not incorporated into the fuel’s price. The IMF treats the costs of global warming, local air pollution and even traffic congestion and road damage as implicit subsidies because fossil fuel companies don’t pay to remedy these problems. The OECD omits these implicit benefits.

But whichever definition is applied, the combined effect of national policies on fossil fuel prices paid by consumers is dramatic.

Oil, for example, is traded on a global market, but the price per gallon of petrol varies enormously around the world, from about 10 cents in Iran, Libya and Venezuela – where it is heavily subsidized – to over $7 in Hong Kong, the Netherlands and much of Scandinavia, where fuel taxes counteract subsidies.

What is the world doing about fossil fuel subsidies?

Global leaders have acknowledged that subsidies for fossil fuels undermine efforts to address climate change because they make fossil fuels cheaper than they would be otherwise.

In 2009, the heads of the G20, which includes many of the world’s largest economies, issued a statement resolving to “rationalize and phase out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption.” Later that same year, the governments of the Asia-Pacific Economic Cooperation forum, or APEC, made an identical pledge.

In 2010, 10 other countries, including the Netherlands and New Zealand, formed the Friends of Fossil Fuel Subsidy Reform group to “build political consensus on the importance of fossil fuel subsidy reform.”

Yet these commitments have scarcely moved the needle. A major study of 157 countries between 2003 and 2015 found that governments “collectively made little or no progress” toward reducing subsidies. In fact, the OECD found that total global subsidies nearly doubled in both 2021 and 2022.

So why are fossil fuel subsidies hard to eliminate?

There are various reasons fossil fuel subsidies are hard to eliminate. Many subsidies directly affect the costs that fossil fuel producers face, so reducing subsidies tends to increase prices for consumers. Because fossil fuels touch nearly every economic sector, rising fuel costs elevate prices for countless goods and services.

Subsidy reform tends to be broadly felt and pervasively inflationary. And unless carefully designed, subsidy reductions can be regressive, forcing low-income residents to spend a larger percentage of their income on energy.

So, even in countries where there is widespread support for robust climate policies, reducing subsidies can be deeply unpopular and may even cause public unrest.

The 2021-22 spike in fossil fuel subsidies is illustrative. After Russia’s invasion of Ukraine, energy prices surged throughout Europe. Governments were quick to provide aid for their citizens, resulting in their largest fossil fuel subsidies ever. Forced to choose between climate goals and affordable energy, Europe overwhelmingly chose the latter.

Of course, economists note that increasing the price of fossil fuels can lower demand, reducing emissions that are driving climate change and harming the environment and human health. Seen in that light, price spikes present an opportunity for reform. As the IMF noted, when prices recede after a surge, it “provide[s] an opportune time to lock in pricing of carbon and local air pollution emissions without necessarily raising energy prices above recently experienced levels.”The Conversation

About the Author:

Bruce Huber, Professor of Law, University of Notre Dame

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Energy Opinions
12 Nov

Brent Crude Stumbles as Market Sentiments Turn Cautious

By RoboForex Analytical Department 

Brent crude oil prices have continued to slip, touching 71.74 USD a barrel on Tuesday. This marks a downturn influenced by China’s underwhelming stimulus measures. The market’s lack of confidence in China’s rejuvenation efforts, coupled with persistently weak inflation and subdued energy demand within the country, has led to this downturn.

Compounding the downward pressure on oil prices, the US dollar’s strength makes commodity investments less attractive, as a robust USD typically dampens demand for dollar-priced assets like oil. However, the geopolitical landscape, which often serves as a driver for oil price volatility, appears stable for now. With reduced tensions in the Middle East, some risk premiums previously embedded in Brent prices have been alleviated.

Investors eagerly anticipate the monthly OPEC report expected later today, which is set to provide deeper insights into the supply-demand dynamics. This report has the potential to influence market sentiments significantly and is a key focus for investors as they consider global oil demand forecasts for 2025.

Brent technical analysis

On the H4 chart of Brent, the market continues to develop a broad consolidation range around the level of 73.66, extending to the level of 71.33. Today, we expect a growth link to the level of 73.66. After reaching this level, developing another downside structure to 71.22 is possible. Further, we will consider the probability of the beginning of the growth wave development to 76.00, with the prospect of the trend’s continuation to 80.80, the local target. Technically, this scenario is confirmed by the MACD indicator. Its signal line is under the zero level and is directed downwards.

On the H1 Brent chart, the market has formed a consolidation range around 73.66 and worked out a downward wave to 71.33, the local target. Today, a correction link for this downward wave is likely with a target at 73.66, followed by another wave of decline to 71.22. At this point, the potential of the downward wave can be considered exhausted. Technically, this scenario is confirmed by the Stochastic oscillator. Its signal line is under 50 and is directed strictly downwards to 20.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
04 Nov

Brent Crude Rises as OPEC+ Delays Production Increase

By RoboForex Analytical Department 

Brent crude oil prices climbed above 74 USD per barrel following OPEC+’s announcement to delay its production increase originally scheduled for December. This decision marks the second postponement by OPEC+ amid persistent global economic challenges and aims to avoid potential market oversupply.

Demand prospects remain subdued with Europe’s slow economic recovery and Asia’s lacklustre performance, particularly in China despite recent stimulus efforts. Additionally, tensions in the Middle East, particularly Iran’s continued threats against Israel, are providing strong support to oil prices, with potential escalations anticipated post-US presidential elections on 5 November.

Concerns that regional oil production facilities might be targeted in these attacks contribute to fears of disrupted supply, further buoying oil prices. Meanwhile, temporary weakness in the US dollar also increases oil prices.

Technical analysis of Brent

Brent crude oil prices have rebounded from a recent low of 70.55 and are upward towards 76.16. The market is consolidating around 73.22, with a potential breakout that could lead to the 76.16 level. Once this target is achieved, a pullback to 73.22 could occur before further gains towards 79.20 are pursued. This bullish scenario is supported by MACD indicators suggesting upward momentum.

Following a correction to 73.22, Brent is poised to ascend to 74.90. A successful breach of this level could pave the way to 76.16. The stochastic oscillator’s position above 50, pointing upwards towards 80, corroborates this potential upward movement.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
29 Oct

Brent Crude Oil Experiences Sharp Price Decline

By RoboForex Analytical Department 

Brent crude oil prices have significantly decreased, reaching 71.46 USD per barrel on Tuesday. Prices fell nearly 6% earlier in the week, marking the most prominent daily drop in two years. The price reduction reflects the market’s reaction to developments in the Middle East, where the escalation of tensions has somewhat subsided.

Over the weekend, Israel’s measured response to Iran, which notably avoided impacting oil facilities and nuclear sites, substantially lowered the risk premium associated with potential disruptions in oil supplies from the region. Furthermore, Israeli officials expressed willingness to consider a temporary ceasefire in the Gaza Strip in exchange for the release of hostages, which has helped reduce some geopolitical risks that were previously inflating oil prices.

With the immediate threats in the Middle East receding, market focus has shifted back to the underlying weak economic data from China and the ongoing production levels from OPEC members. Additionally, upcoming US employment data will be closely monitored as it may provide further clues about the Federal Reserve’s forthcoming rate decisions. The prevailing expectation is two more rate cuts of 25 basis points each before the year ends, a scenario generally supportive of the energy sector. However, much of this has already been priced into the market.

Technical analysis of Brent

Brent crude is currently developing a corrective pattern targeting the 70.55 USD level. If this level is reached, the market may anticipate a rebound towards 75.75 USD. A breach above this could open up the possibility for a rally towards 80.90 USD, with further prospects to reach as high as 85.85 USD. The MACD indicator supports this bullish outlook, as its signal line is positioned below zero, indicating potential for an upward movement.

On the hourly chart, Brent is finalising a correction to 70.50 USD, currently forming the fifth wave of this corrective phase. Once the target of 70.50 USD is achieved, expectations shift towards a new growth wave, aiming for 73.23 USD as the initial target. This bullish Brent forecast is corroborated by the Stochastic oscillator, with its signal line poised below 20, suggesting a pending upward correction.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

Energy Financial News
15 Oct

Brent: Slumps on easing Middle East fears

By ForexTime 

  • Brent ↓ 6% this week
  • Fundamentals swing in favour of bears
  • Watch out for US/China data and EIA report
  • Technical levels: $77.90, $75 & $73

Oil benchmarks have been hammered this week, shedding over 6% thanks to potent fundamental forces.

  • The global commodity stumbled into Monday’s session after China’s highly anticipated Finance Ministry briefing failed to impress investors.
  • OPEC’s monthly oil market report rubbed salt into the wound as the cartel cut its demand forecast this year for the third time in a row.  
  • But the knockout blow for oil was delivered on Tuesday morning following reports that Israel may avoid striking Iran’s crude infrastructure.

With this development easing concerns over wider conflict and major supply disruptions, oil was left under the mercy of bears this week:

  • WTI: -6.6%
  • Brent: – 6.1%

Despite these heavy losses, oil prices are still up month-to-date and may see more volatility this week due to ongoing developments in China and US rate expectations.

This brings our attention to key US and China data scheduled near the end of the week.

  • Thursday, October 17th: US retail sales, initial jobless claims, EIA data
  • Friday, October 18th: China GDP, retail sales, industrial production, home prices

Over the past few weeks, confidence has improved in the US economic outlook thanks to better-than-expected data. If this translates to improving oil demand, the global commodity could receive a boost.

Still, US crude inventories have been rising over the past two weeks raising questions about demand. The latest EIA data on Thursday has the potential to move oil prices.

But it’s all about the data dump from China on Friday which could provide fresh insight into the health of the world’s largest energy consumers. Ultimately, a strong set of figures from China may boost optimism over the demand outlook – supporting oil prices as a result.

Looking at the technicals…

Prices are under intense pressure on the daily charts with Brent respecting a bearish channel.

There have been consistently lower lows and lower highs while the MACD trades to the downside. However, daily support can be seen around the $75.00 level.

  • Sustained weakness $75,00 could send prices back toward $73,00, $70.80 and $68.80.
  • Should $73.00 prove reliable support, this could trigger a rebound toward the 21-day SMA at $75.00 and $77.90.

Brent 3

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Energy Financial News
08 Oct

The Energy Bull Has Returned

Source: Michael Ballanger (10/7/24)

Michael Ballanger of GGM Advisory Inc. takes a look at the energy market, and shares his thoughts on junior miners. 

Last week, I decided to write about the fiscal bazooka engaged by Chinese President Xi Jinping that sent Chinese equities into a vertical moon rocket with relative strength for the major indices, hitting an all-time record at 91. From David Tepper to Louis Gave, the China bulls are now stampeding with the ferocity of the spooked herd while short sellers bleeding from the eye sockets and hair ablaze are covering with unfathomable urgency.

The move by the Chinese central bank to dive headlong into an easing cycle follows the past two years of pain as the real estate market has stagnated under the weight of oversupply and bubbly consumer attitudes. Overproduction in the EV sector has left inventories overflowing in both unsold units and the age of the fleet, as vast numbers of rotting vehicles are sitting in car lots around the country. Something had to be done, and it was as if Xi Jinping took aim and pulled the trigger.

Initially, the advance in Chinese equities was celebrated by only the bravado-laden diehard contrarians who had been buying large-cap Chinese companies at eight times cash flow with 75% of market cap in cash, similar to January 2023 when the Japanese equity markets suddenly caught a bid on the basis of their valuations relative to the over-owned, over-priced U.S. counterparts that have benefitted from a constant, never-ending combination of fiscal and monetary stimulus all designed to juice stock prices and maintain the asymmetrical wealth-effect so critical for sustained economic growth.

However, what few were talking about was the ancillary impact the Chinese stimulus move had on a number of other sectors. Copper, which I identified in early August as a “Buy” under $4.00/lb. (after exiting in May) was well on its way to test the 100-dma at around $4.40, but it received an enormous shot of adrenalin with the news that China had suddenly gone “full-Draghi,” deciding to do “whatever it takes” to get the economy back on track.

Copper is now ahead over 20% from those “carry trade crash” lows now cruising with a gale force Chinese tailwind behind it.

However, the sleeper in the China stimulus narrative is the one commodity that drives all economic growth — oil — and whether or nor it is politically correct, it is not going away anytime soon. Subscribers were sent an email alert last Tuesday before the opening suggesting that I was revisiting the “energy trade.”

In that email alert, I wrote:

“The ETF that covers the big multinational oil & gas producers is the Energy Select Sector SPDR Fund (XLE:NYSEARC) that has traded as low as $78.98 last January and at USD $82.34 a couple of weeks ago. As can be seen from the chart, there have been three major “buy signals” since the lows of last month, with MACD, MFI, and now TRIX all kicking into gear. Accordingly, I want to take advantage of today’s pullback and take a starting position in the XLE. I have traded this ETF before, and when it moves, it moves fast with big gaps in price, and while it is not always easy to nail down the exact lows, sentiment numbers and trader positioning are about as dismal as one can get for any specific sector.”

The chart shown below was from the Monday close at $87.80, and my instructions were that bids at $87.00 might be successful since oil was called lower for the Tuesday opening. The XLE opened at $87.03, traded down to $86.90 after which oil executed a massive reversal to the upside taking XLE to a closing price of $89.80.

There are a great many oil bears out there that want to see fossil fuels outlawed and ICE’s outright banned. I consider those attitudes as archaic and ill-sighted as the electrification transition will take decades to complete. Thinking that the world can survive and grow without the use of oil is delusional.

I am not a moralist; I am a financial opportunist. I pore over charts and essays and financial statements day after day to try to find what I believe are legitimate chances to profit, with not even the slightest consideration of what the company may or may not be doing to “save the planet.” I recall one afternoon driving home from hockey practice in 1962, listening to the CBC newscaster discussing relations between JFK and Soviet premier Nikita Khrushchev regarding nuclear disarmament.

Frightened by what I was hearing, I asked my dad if “mankind” was going to bring about the end of the world. My dad responded with an answer I can never forget. He said, “Son, “mankind” will never bring about the end of the world. It might bring about the end of “mankind“ but it will never cause the end of the world.”

The egotism of these moralists who preach about carbon credits, global pollution, and every imaginable ecological sin committed by Big Oil or Big Nuclear, or the military-industrial complex is beyond maddening. Watching the student body of a university lying in front of cars, trucks, and buses as a protest to the petroleum industry takes me to a place that I won’t even mention.

I was one of those poor slobs during the Arab oil embargo of 1973-1974, sitting behind the wheel of a 1965 Ford Custom while in a 30-car line-up waiting for a chance to fill the tank up, which was running on fumes. It was not a fun time.

Another name I now own is a fascinating little junior from the Alberta oil patch called HHemisphere Energy Corp. (HME:TSX.V), which I bought last Tuesday. Paying a 5% dividend, the company uses a Polymer-flooding technique to enhance oil recovery from pools in Alberta and Saskatchewan.

They have been growing production systematically since 2017 and had a record year in 2023 and expect even better for 2024.

It is a perfect addition to a mining-centric portfolio and delivers diversification with an enviable income stream.

Gold and Silver

Gold put in a decent week, and up until around 11:00 am this morning, after the traders had a couple of hours to mull over the jobs report, silver made a very brief sojourn into the new 52-week high ground before coming under the merciless wrath of the bullion bank behemoths that decided to crush the breakout with undeniable conviction and send it down from an $.80 advance to a $0.07 loss on the day.

The silver bugs were collectively disheartened and summarily vanquished as they always are whenever they start to trot out the champagne flutes, cymbals, and pompoms. I am positive about the inevitability of a silver breakout, but it will be led by gold and copper, the two primary drivers of the bull market in the metals. While gold is being driven higher by that constant and persistent central bank bid, copper is being driven by a rapidly approaching structural deficit that is going to disrupt the global flow of everything because copper is found in everything.

Housing, electronics, medicine, and a myriad of other products and industries that rely on copper for its universal application. Silver, while also used in a broad spectrum of industrial applications, is primarily driven by the retail crowd ever seeking a “poor man’s gold” and, as such, rarely winds up being owned but rather rented with an ownership horizon far shorter than either gold or copper.

That explains the volatility in the silver market and why it is that the bullion bank traders find it so much easier to bat silver around whenever they choose while rarely daring to try the same with gold and never trying it with a market as wide and expansive as copper. That said, there will be a point in time and soon when silver will overtake both gold and copper and assume a leadership role, which will make the silver bugs giddy with “I-told-you-so” excitement as it grabs the reins and vaults into the lead, grabbing headlines in every financial publication and two-bit tout sheet across the globe.

The silver bugs will all rejoice in their final and ultimate vindication of owning one of the worst-acting metals of the past four years, and while I will be an owner of silver when that occurs, I shall not be mired in self-adulation because, at the point in the metals cycle where silver grabs all of the headlines, it is also the terminus of the move in the metals.

Every metals bull market ends with the silver bugs shaking their fists at the world, and when that occurs, as happened in 1980 and 2011, I want to be in full liquidation mode of the more speculative pieces in my metals portfolio and moving to hedge the “never-sell” portions that are intractable items for the financial future.

This is why I have always wanted gold to lead the pack slowly, quietly, and methodically, as it has since 2020, correcting and advancing with higher highs and higher lows. I never want to see CNBC “Guest Commentators” voicing their opinions on a gold market that has been “LIMIT UP” for three straight days because once the prey comes out of the brush and into the broad daylight, it becomes an enviable target.

Near-term, gold prices are due for a correction. The bearish indicators all line up after RSI moved into overbought extremes in late September. Unlike last April when I tried to trade the correction, I will simply stand aside and let the market work off the overbought condition and try to time the pullback so I can be leveraged properly into new highs by year-end.

For now, no new buys in the bigger names, but the juniors are still ridiculously “cheap.”

Stocks

Friday’s NFP report showed a blow-out increase in the number of new jobs, sending the CNBC cheerleaders into a full-on feeding frenzy as the stocks took aim at all-time highs. The cheering centered around “good news” on the economy being “good news” for stocks, and despite the bond market taking it on the chin, when one lifted the hood and looked into the engine room, all one saw was a bunch of new government jobs and a “wages paid” number that set off the inflationary alarm bells with vigor.

However, the bulls are carrying the day but with the Middle East on fire and the REPO and SOFR markets starting to sweat bullets (i.e. liquidity drying up), I will remain fully-hedge until at least the end of the month.

Rising wages, rising oil, rising gold and rising 10-year yields are never earmarks of a risk-free equities environment. Caution is warranted.

 

Important Disclosures:

  1. Michael Ballanger: I, or members of my immediate household or family, own securities of: All. I determined which companies would be included in this article based on my research and understanding of the sector.
  2. Statements and opinions expressed are the opinions of the author and not of Streetwise Reports, Street Smart, or their officers. The author is wholly responsible for the accuracy of the statements. Streetwise Reports was not paid by the author to publish or syndicate this article. Streetwise Reports requires contributing authors to disclose any shareholdings in, or economic relationships with, companies that they write about. Any disclosures from the author can be found  below. Streetwise Reports relies upon the authors to accurately provide this information and Streetwise Reports has no means of verifying its accuracy.
  3.  This article does not constitute investment advice and is not a solicitation for any investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Each reader is encouraged to consult with his or her personal financial adviser and perform their own comprehensive investment research. By opening this page, each reader accepts and agrees to Streetwise Reports’ terms of use and full legal disclaimer. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company.

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Michael Ballanger Disclosures

This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.

Energy Opinions
02 Oct

Brent Crude Oil Prices Rise Amid Geopolitical Tensions

By RoboForex Analytical Department 

Brent crude oil prices climbed to 74.55 USD per barrel by Wednesday, marking a significant increase driven by escalating geopolitical tensions in the Middle East. The previous session saw prices surge by over 2% as fears grew over potential crude oil shortages due to the intensifying conflict in the region, particularly with Iran’s heightened involvement.

Iran, a key member of OPEC, holds substantial influence over global oil supplies. Its assertive stance in the Middle East conflict raises concerns about disruptions in energy exports, which could tighten the global oil market and push prices higher.

Mixed market sentiments

Despite the upward pressure from geopolitical factors, the overall sentiment in the oil market remains mixed. One of the dampening factors is the weak demand from China, the world’s largest oil importer. China’s sluggish economic indicators have limited the potential for a sustained recovery in oil prices, as reduced industrial activity translates to lower energy consumption.

Adding to the complex market dynamics, the American Petroleum Institute (API) reported that US crude oil inventories decreased by 1.5 million barrels during the week. This decline was less than the anticipated drop of 2.1 million barrels, marking the second consecutive weekly decrease but suggesting that demand may not be as robust as expected.

Furthermore, the appreciating US dollar has not yet significantly impacted crude oil prices but could do so in the future. Typically, a stronger dollar makes oil more expensive for holders of other currencies, potentially reducing global demand and applying downward pressure on prices.

Technical analysis of Brent crude oil

On the H4 chart, Brent crude found support at 69.90 USD, forming an upward wave targeting the 75.50 USD level. After reaching this point, a correction back to 72.66 USD is possible. Subsequently, there is potential for a new bullish wave extending to 78.20 USD, which serves as a local target. The MACD indicator technically supports this scenario; its signal line is below zero but trending sharply upwards, indicating increasing bullish momentum.

On the H1 chart, Brent broke above the 72.66 USD level and reached a local target at 75.30 USD. A consolidation range is expected to form below this level. A corrective move back to 72.66 USD (retesting from above) is possible, potentially leading to a downward exit from the consolidation. Once this correction is completed, the price may resume upward towards 75.50 USD, the initial target. The Stochastic oscillator technically confirms this Brent outlook, with its signal line below the 80 level and preparing to decline, suggesting a short-term correction before further gains.

Conclusion

The interplay of escalating geopolitical tensions and mixed economic signals continues to influence Brent crude oil prices. While concerns over supply disruptions due to Middle Eastern conflicts push prices upward, weak demand from China and inventory data from the US temper this rise. Additionally, the strengthening of the US dollar could impact global oil demand in the near future. Traders and investors should closely monitor these factors, as they will likely contribute to continued volatility in the oil market.

 

Disclaimer

Any forecasts contained herein are based on the author’s particular opinion. This analysis may not be treated as trading advice. RoboForex bears no responsibility for trading results based on trading recommendations and reviews contained herein.

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