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Oil Market Update - IMPACT OF SPREADING MID-EAST WAR...

Clive Maund
Oct 31st, 2023


Henry Kissinger is reported to have said back in 2012 that “In 10 years Israel will no longer exist”. Well, it’s 2023 now so it still exists 11 years later, but that said, the way the Arab / Muslim world feels now towards Israel after its treatment of the Palestinians these past several weeks does raise the question of whether it will exist for much longer. Israel’s cavalier attitude and decidedly undiplomatic behaviour towards surrounding Arab states is of course borne of its feeling of invincibility, because of its control of the United States whose taxpayers and Central Bank are a source of bottomless funding for Israel and whose military it has at its disposal. There hasn’t been much to laugh about in recent weeks but one darkly comical aspect of this whole business has been watching US politicians falling over themselves to lavish praise on Israel and commit to 100% backing of it, regardless of what it does – if it said it planned to annihilate every single Arab in the Middle East they would be cheering it on and that’s really not such a smart idea considering how many Arab / Muslim immigrants have already entered the US over the past several years. The behaviour of US politicians is actually very reminiscent of the Politburo in communist Russia in the 1920’s where they would sometimes give standing ovations for half an hour or longer to senior party members like Stalin until people started falling over from exhaustion because no-one wanted to be seen to be the first to stop applauding. De Santis and Trump have been jockeying for poll position in the “praise Israel” stakes and I’m not sure who won this contest, although it would be hard to Trump Trump’s ebullient effusive praise.

The problem for Israel is that it may be nowhere near as invincible as it thinks it is. In the first place some of the Arab states around it have moved on over the past ten or twenty years from being medieval goat herders to having some pretty advanced militaries and weapons, such as hypersonic missiles that can send US carriers to the bottom of the ocean in minutes. Secondly, if the US dollar loses its reserve currency status, which it is actually in the early stages of doing, then it will become worthless toilet paper at an alarming speed because of the enormous dollar debts in which case the debt-wracked US will implode to become like Venezuela and Israel will be left to fend for itself. This is the reason that the BRICS are rapidly expanding – its members are tired of the Hegemon throwing its weight around and starting wars around the world to further its geopolitical agenda and enrich politicians who are on the take from lucrative arms deals and private security companies’ contracts etc.

A complicating factor is the World Economic Forum which is the already existing world government who are the puppet masters of most governments and politicians and who are playing one side off against the other. Given their known objective to drastically reduce the world population by 2030, a major wars or wars suits them just fine as a follow on to the bioweapon injections which were a success in terms of terms of culling some of the population but are a success that needs to be built on by means of major wars and destruction of the food supply etc. The reason for mentioning this is that if they could get Iran to block the Straits of Hormuz the result would probably be $300 a barrel oil which would bring the world economy to a dead stop and be a major milestone on the road to a much less populated planet. It doesn’t take much “reverse engineering” to figure out how they could get Iran to do this – they simply mount a major bombing campaign against it, possibly even involving some nukes to spice it up a bit, which would be the fulfillment of a lifetime ambition for a lot of aging Neocons who could then go to their graves as happy men, with the “cherry on the cake” being that a major disruption to Mid-East oil supplies would have a far greater impact on China than the US, as China gets a lot of its oil from the Mid-East. It is understood that the WEF have penetrated the Iranian government too (ve haf penetrated ze cabinets) which would help to expedite the desired response. Of course, if $300 oil did materialize and the world economy collapse as a result, oil itself would then collapse in price later due to the plunge in demand.

The point of setting all this out is so that you understand that a much higher oil price as a result of the situation in the Mid-East spiralling out of control is a lot more likely than most people realize.

Now we will proceed to look at several key oil sector charts.

Starting with the 6-month chart for Light Crude the first point to make is that despite the world completely changing since the last update was posted in the middle of September, we have still seen a reaction back by crude, and the reason for this is simply that, as we had surmised in that last update, it wanted to unwind its earlier overbought condition. However, the market does not seem to appreciate the potential for massive supply disruption due to the Mid-East war spreading. The reaction by oil from its late September peak has brought it back to an important support level so we are at a good point for it to turn up.

Turning now to the United States Oil Fund chart we see that it has also reacted back to an important support level that not surprisingly parallels the one on the oil chart but a very important point to observe on this chart that does not show up on the oil chart is the persistent expansion of volume this month compared to previous months which is viewed as bullish because most of this volume is upside volume which is why the Accumulation line at the top of this chart has been rising and it even made new highs in recent days.

Lastly we will look at the Oil Index chart (XOI index). Over the past couple of weeks it has reacted back towards a zone of quite strong support, in the process more than unwinding its earlier somewhat overbought condition. This is a good point for it to turn up, especially as the broad market is now picking up on the prospects of improved liquidity thanks to the creation of more money to fund wars, especially the war in Mid-East and the associated “blank check” for Israel. So oil stocks could benefit both from an improvment in the broad stockmarket and especially if the oil price should take off due to Mid-East supplies being threatened.

End of update.

Posted at 6.15 pm EDT on 31st October 23.

Clive Maund
Oct 31st, 2023
support@clivemaund.com

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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