Will oil hit $150?

The war on fossil fuels is heating up as the race to ‘net zero’ accelerates towards the finish line in 2050 (some want it sooner). Of course, this is conveniently nearly 30 years hence when most alarmists and politicians will be safely retired and out of harm’s way.  But for now they are deadly serious and will use every trick in the politician’s book (incentives aka bribes) to make it happen – until they hit a brick wall, of course.

I see that the UK government is now proposing that all companies bidding for contracts over £5 million must prove they have a viable plan to achieve this goal.  How this will be assessed in such complex scenarios will inevitably be a political decision and devoid of any rational scientific basis, as is usual.  In other words, the usual British fudge to force the pre-ordained result.

But do I smell a major opportunity in the despised oil market?  It is clear the low hanging fruit of conversion to electricity from oil in the form of EVs is being picked (although as I showed last week in my chart of The Electric Car Crash, the markets are giving it a very bumpy ride with EV shares in collapse, including Tesla).  And ‘renewables’ in the form of solar and wind are increasing their share of power output – although with major subsidy help from governments keeping electricity prices within bounds.

Even the oil majors are pledging great efforts to reduce their ‘carbon footprints’ as they fight a rear-guard action to reduce reputational damage. So with huge political pressure on them to scale back on discovery and production efforts, the control of global oil output is being handed to OPEC and the independents by default.  These have more oil-friendly governments, despite them paying lip service to going ‘green’.

Incidentally, I have always thought that the climate alarmists have totally mis-labelled their efforts as ‘green’.  Surely, green is the colour of plants and these thrive in a higher incidence of carbon dioxide in the atmosphere.  So if they are truly ‘green’, they are really advocating more CO2. and a higher use of fossil fuels. Reducing CO2 reduces the production of ag crops – our basic foodstuffs.

Also, oil demand is still increasing as the electric and renewables revolution is still in its infancy. And this throws up a very interesting dynamic.  With demand still increasing and global supply falling away from the Western oil majors, will OPEC grab the chance to regain its dominant position it once held in the 1970s and 1980s when it fathered the great Oil Price Shocks?

I am old enough to remember the last one when some of my friends pledged to sell their car when the petrol price rose above an outrageous 50p – a gallon! That is 11p a litre – one tenth of current prices.  Of course, most did not follow up on that threat.

Will OPEC and the other independents be able to force through a similar price shock but in slower motion? If so, then the old high in 2008 at $147 may well be in jeopardy – and a massive trading opportunity is looming.  Here is the long term monthly chart

One stand-out feature is the eleven-year downtrend line joining the major highs.  Crucially, with the recent surge, this line has been penetrated to the upside – and that is a bullish sign.  Any time a reliable major trendline of eleven years is broken, that usually gets my attention.  Provided this line holds in any possible correction, I have my Fib targets marked.

VIP Traders Club members remain long crude.

Will nuclear energy rise from the dead?

On many levels, nuclear energy is the almost perfect ‘green’ energy source.  If it were not for the memory of two bad accidents – Fukushima and Chernobyl -I am confident there would be many more nuclear reactors on the landscape.  Sentiment towards nuclear energy has been in the dumps for years. Capping the over-reaction of governments to the 2011 accident in Japan, Germany phased out all its nuclear plants and went full ‘green’ – and that has resulted inevitably in some of the most expensive electricity rates in Europe.  Already the political landscape in that country is moving away from that extremist stance.

There is now talk that nuclear is making a come-back as the latest iterations of reactors is proving extremely safe.  And uranium prices are edging up in tandem with the general commodity sector.  Last week I made a case that Yellow Cake plc, a UK-based uranium trader (‘yellow cake’ is the brightly coloured uranium oxide powder used to make the fuel rods) should be a winner in the move back to nuclear.  

The chart of the two-year old company shares is pretty unexciting but with the new highs in recent days, the trend is back up.  This is a minnow but may well be worth a punt.

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Tullow Oil – another Lazarus-like set-up?

This Africa-based producer has been written off several times as its debt load is high and oil prices have been low until recently.  But with the prospect for further gains in oil, is our Pro Shares selection in line for further gains?  This is the chart that guided me to advise buying back in November.

Late last year, I noted the five wave decline on a very strong mom div to the 8p Corona Crash low in March last year.  From there, it has edged up grudgingly and even now at the 60p rally high the advance is hardly making a bump in the chart.  But since we entered at 9p in November, the current 60p print is giving us a very tidy percent gain.

But is there more?  If I am right that the oil price will continue trending up, I believe my first major target at the 250p region is certainly feasible.  Just up ahead at the 85p area lies the edge of a large gap formed on the slide down in December and this is a great initial target.