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Clive Maund
Jan 11th, 2024

We haven’t looked at oil in the recent past because it has been stuck in a downtrend since late September that showed little sign of ending. This is because of gathering weakness in the global economy reducing demand but now there is another major factor coming into play that promises to change the supply /demand equation drastically – the threat of an imminent major war in the Mid-East.

Diplomacy coupled with goodwill could of course reduce the gathering tensions in the Mid-East but Israel and the US have no interest in either. You will understand the geopolitical situation a lot more easily if you simply rename the United States as Western Israel which is a logical and reasonable thing to do as the United States is completely controlled by Jews / Israel, a clear example of this fact being the way that any motion by the United Nations that is perceived to be counter to the interests of Israel is automatically vetoed by the US. There are many situations where if you simply substitute the words “Western Israel” for “United States of America” everything suddenly becomes clear. Instead of working to defuse tensions Israel and the US are intent on persuing the Greater Israel Project which involves Israel expanding its area greatly to ultimately extend from the Nile to the euphrates rivers which of necessity will involve it seizing territory from many surrounding Arab states. Assuming the project is successful, Arabs in the appropriated territories will have two choices if they are still alive – leave or work as a servant class in the Greater Israel, rather like the Palestinians have been doing up to now. Israel has always intended to eventually either exterminate or drive out the Palestinians which was not politically possible up until recently, but now that they control the entire western world they can go ahead and do it and they are doing it right now as a first step towards the creation of a Greater Israel. At the same time the drive to create a Greater Israel will allow the US Neocons – if successful – to fulfill their long held ambition of destroying Iran, which was on their “shopping list” of countries to destroy after 9/11 that included Afghanistan, Iraq, Lebanon, Libya and Syria.

The reason that conflict looks inevitable is that these various Arab states object to being assaulted and at least partially taken over by Israel and / or the US (Western Israel) and they have been and are modernising and beefing up their militaries and weapons systems at a very rapid rate. This is the reason for the sense of urgency by Israel and the US – they want to strike as soon as possible and subjugate the Arab world while they still have the upper hand, as they see it. The US economy, crippled by astronomic debts and no longer having any manfacturing base, is teetering on the verge of collapse with the catalyst set to be the BRICS and the dumping of the dollar and Treasuries and this combined with Mid-East countries moving ahead militarily is what is creating this sense of urgency. Also, a big war soon will help to take the masses’ minds off the gathering vaccine holocaust and their growing impoverishment. So they want to get a major war going and a reason for the brutal genocide of the Palestinians in Gaza and increasingly the West Bank is that they are trying to goad surrounding Arab states into taking action – Turkey wants to take action but is scared of the US military, which perhaps they shouldn’t be given the now obvious failure of the Ukraine venture coming soon after getting their backsides kicked in Afghanistan. The big prize is Iran of course and last week we saw “false flag” attacks being conducted in Iran in an effort to trigger a reaction so that they can then use that as an excuse to start a bombing campaign against it.

If a hot war gets going in the Mid-East soon, as looks very likely for the reasons just set out, then oil supplies from the region could quickly be severely disrupted which would cause a huge spike in the oil price. For example, Iran could easily stop all maritime traffic through the Straits of Hormuz. Incidentally, the reasons for the obstruction of Red Sea maritime traffic which results in cargoes having to be re-routed around South Africa are twofold. One is it deprives Egypt of Suez Canal toll income, an important source of revenue, which will make Eqypt more amenable to accepting payments to take in Palestinian refugees in Sinai as the survivors are forced out of Gaza and secondly the supply chain disruption this entails furthers The Great Reset agenda.

So, conflict across the Mid-East looks set to ramp up a lot going forward. This being so you would think that the oil price would be advancing already to reflect this, but so far it has hardly moved. This is thought to be due to the “Missouri” effect. Missouri is called the “show me” State in the US because they have a reputation for not believing anything until they see it. If markets are thinking like this, then the oil price will take off higher when it becomes blatantly obvious that major conflict is imminent. So now we will proceed to review the charts to see the current setup.

On the 5-year chart for Light Crude we can see that it remains in a major downtrend that began early in 2022 following a near-vertical blowoff top. This downtrend had brought the price down to a strong support level by early last year which generated a significant rally last Summer. However, after that it went into retreat again and has dropped back towards the support again and, given how things are developing in the Mid-East, it is suspected that the price may be forming a Double Bottom with the lows of last Spring.

Turning now to the 1-year chart we see that that Light Crude has been in a quite steep downtrend from its late September peak, and it is rather surprising how this has continued given the way things are shaping up in the Mid-East. With the downtrend having brought the price down close to the strong support shown it is considered highly likely that it has run its course, especially given the increasingly dangerous developments in the Mid-East and even though the downtrend technically remains in force we can see a significant improvement in momentum (MACD) in recent weeks that may be a precursor to an upside breakout.

Turning now to the charts for the XOI oil stocks index we see on the 5-year chart for this index that it has been in an uptrend since late 2020 and it has held up well and even advanced somewhat as the oil price has retreated from its 2022 highs. However, an upsloping trading range has formed in the index since the middle of 2022 that could be either a bearish Rising Wedge leading to it dropping away or a bullish Ascending Triangle that leads to another strong advance and what it ends up proving to be doubtless will depend on how things play out in Mid-East going forward. If a hot war gets going as expected, then this index will probably break higher into a steep upleg in sympathy with oil itself.

The 1-year chart for the XOI oil stocks index is interesting as it shows that it broke out of a bearish looking Distribution Dome pattern just last month, putting it in position to break out to new highs, and this move was accompanied by a momentum breakout (MACD). From this position it wouldn’t take much of a move for the index to break out to new highs, and an upleg from here will quickly swing the moving averages into bullish alignment.

Lastly a 6-month chart showing oil stocks’ performance relative to Light Crude reveals a suprisingly regular uptrend, or outperformance of stocks relative to oil, since September. While this outperformance can be partly explained by the stockmarket generally doing well and oil stocks “coming along for the ride”, normally this sort of divergence leads to oil “upping its game” rather than to stocks dropping – and the Fed can create plenty more money out of thin air to throw at propping up the stockmarket, and the bondmarket for that matter, and the inflationary consequences are only a problem for the little guy.

End of update.

Clive Maund
Jan 11th, 2024

Clive Maund is an English technical analyst, holding a diploma from the Society of Technical Analysts, Cambridge and lives in The Lake District, Chile.

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