Oil Price Barreling Upwards (Part 1)
Unlike the iron ore market which has (at least) 3 major structural headwinds, the factors impacting the market for oil are cyclical and/or transient in nature. We have hence been monitoring this key commodity closely to identify a 'bottom', followed by an accumulation period and subsequent technical break-out. The current price action suggests we are now at this point. In particular we note: 1. The initial breaking of a series of downtrending lines 2. Bullish divergence at the mid-March low point 3. An initial break above the 50 day moving average (dma) followed by a move above the 200 dma 4. The completion of an accumulation phase with the breakout above the $53.50 level. This is an important inflection point in the oil market. If this analysis proves to be valid, then the upside is potentially sizeable. This time last year West Texas (WTI) was trading around US$105 per barrel. A move even part way back towards this level will be even more rewarding for Australian producers given the lower $AUD. Tomorrow we highlight our top ASX-listed oil holding.
Katana Asset Management was founded in September 2003 as a boutique investment management firm. Katana employs an all opportunity investment mandate being style, sector and market cap agnostic.