Crude Oil - How low will it go ?

Crude Oil WTI (USD/bbl 59.95)

Crude oil (WTI) future closed at $59.95 on Thursday. It is forming its wave 3 currently.

In 2011, wave 1 dropped by 34%. If I apply a fibonacci ratio of 1.618 to its wave 1 percentage drop, its wave 3 is likely to end at $55.00. Wave 4 rebound is likely to fluctuate between $55.00 and $80.00 for the next few years.

This is purely an academic exercise for me.

It is interesting to note that the peak for crude oil was in April 2008 which is lagging behind the Dow's peak at October 2007 by 6 months. Whereas its bottom in December 2008 is ahead of March 2009's Dow bottom by about 3 months.

It is also interesting to note that from April 2011 to Dec 2014 when the crude oil price moved side way, Dow moved from 12,400 to 17,958 for a 45% gain.

Assuming Roubini is right, it is possible that the current setback for Dow is just a higher degree correction. For the next 2 years if the crude oil price really moves side way fluctuating between $55 and $80, Dow may gain another 45%. Anyway if crude oil price can stabilize say around $70 a barrel in 2015/2016, it should be good for the world economy. Assets bubble may not burst so soon.


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