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Thursday, March 21 , 2019, 10:18 pm | Fair 52º


Letter to the Editor: Brent Crude Update

My prediction as to the future price slide of Brent Crude Oil made in late September --  based, as always, on my admittedly amateur interpretation of Technical Analysis - proved grossly inaccurate.

The price of Brent Crude is used world-wide as an indicator of the health of oil-related industries.

The price of West Texas Intermediate is used for that purpose mainly in the United States.

The rationale for Technical Analysis is that everything known, suspected, feared, and hoped for is reflected in the price of a stock, commodity or overall market, and that the behavior of these prices when fulfilling certain patterns, indicates a probable move in one direction and even the probable extent of that move.

In late September, the price of Brent Crude broke down through what's called a "triangle," indicating a move further downward to about $38/barrel. (See the blue lines.)

A few days later, however, the price sharply reversed and shot up.

It has now broken through a triangle on the up side (see the red lines) indicating a move upward to about $60/barrel.

My understanding of the reversal is this: Saudi Arabia took all industry observers and analysts completely by surprise by announcing it would agree to a freeze in its production. Since no analysts/experts anticipated this, it had not been reflected in the price, but now it is reflected in the price direction.(There is some caution in that the "up" trading volume of the last few days has slacked off a bit.)

This post is not intended as investment advice. I have no current or planned position in any oil-related company. I receive no compensation of any kind for these comments.

I have for some time had an interest in the economic health of oil-related industries.

William Smithers
Santa Barbara

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