Crude Oil Price Trend Forecast-2009
Kanti Mohan Pandit
Director, Business Intelligence & Forecasting, Kolkata
Based on ‘Solar Functional Energy” model
On June 2008 I published my first post in my blog with caption “Natural Death of Crude Oil Inflator TR’. I made the loud pronouncement about the near outright downfall of Crude oil prices from next month. This forecast was just opposite to the common forecast generally made by other experts about the bouncing crude prices ahead. The trend line forecasts were easily accepted by the traders and readers and my forecast was rejected. My readers were dismayed when the forecast came true and crude oil price started tumbling since July 08. Today six months have passed with the falling trends that made it an issue and a matter of shock for oil producers. They are apprehensive about the repetition of the kind of oil shocks they had experienced in 1997 and 1998 when the Brent oil prices had nosedived to single digit figure.
According to OPEC “Oil prices have witnessed a dramatic collapse – unprecedented in speed and magnitude,” OPEC said, adding that prices have fallen to levels that could jeopardize “many existing oil projects and lead to the cancellation or delay of others, possibly resulting in a medium-term supply shortage.”
The downward movement for the OPEC Basket of oil continued for the sixth consecutive month, dominated by the worsening economy. Many countries had moved into recession and the plunge in equity markets to a five-year low triggered fears of further oil demand destruction .The worsening economy and weak demand continued to weigh on market direction.
The forecast for the global economy in 2009 has been slashed by 1.4 pp to 1.5% as the major OECD regions slip deeper into recession and growth everywhere else slows. Following downward revisions, US growth in 2009 is now forecast at -1.3%, Euro-zone growth at -1.0%, and Japanese growth at -1.7%. Developing Countries are now expected to grow at 3.7% while China’s growth forecast now stands at 7.0% in 2009 while India’s GDP growth is expected to moderate to 5.8%. The US is officially in recession since December 2007, making the current recession already longer than the previous two. US labor market conditions have taken a turn for the worse in November, with a drop of more than half a million in payrolls. The unemployment rate at 6.7% is already higher than the peak reached in the aftermath of the 2001 recession. US retail sales continued to fall for the fifth month in a row. In the Euro-zone and Japan, recent economic indicators point to a deepening of the recessionary conditions as exports and industrial production slumped. In China, exports declined for the first time in seven years in November and industrial production growth fell sharply.
The vain attempt by the OPEC cartel to control the situation by reducing the daily production of 1.5 million-barrel daily reduction failed to rally crude prices, which have been plummeting since hitting a record high record high of $147 a barrel on July 11. The demand for oil and energy has been falling continuously because of ongoing recession in the world market. The International Energy Agency (IEA) has already cut its growth forecast by 190,000 bpd to 690,000 bpd on the basis of reduced demand by developed countries. The crude oil price did not take any cue from these measures of OPEC and IEA and kept falling. From middle of November 2008 after touching the bottom the price lifted to $49 per barrel by December last. Recession continues to affect the demand for crude by the emerging economic giants of China and India. Stronger dollar has ensured that the actual fall in foreign currency terms has been less than for the United States. This implies continued weak trend for crude oil for the duration of the U.S. recession which is the key to crude oils trend for 2009. Crude for February delivery ended down at $35.35 a barrel in Nymex dealings. Crude has tumbled 63% in 2008, heading for its worst year since futures started trading on the Nymex in 1983.
T-A-R Scope for Future Oil Trends
‘Energy Cycle of Business’ takes into account the solar Functional Energy as the base. Solar Functional Energy is the solar rays transformed into solar electricity by external sources of positive charges (A) and negative charges (T). Together T+A establishes functional relationship with earth through human brain to act for productive activities in oils and minerals. The presence of dark energy ‘R’ often intercepts this productive energy and weakens the productive activities to cause slump in the economy and the industry. Solar Functional Energy(C) is a function of T+A -1/R.
The T-A-R energy capsule is an integral part of and major transformer of solar rays into ‘Functional Energy’ that earth absorbs to turn its resources into material wealth. The combination of T+A promotes exploration and manufacturing of minerals and products but its separation T-A reverse the process. Combination of ‘T’ and ‘R’ particularly in power points leads to excessive and undue demands for hoardings etc that causes inflationary situation.
Based on this T-A-R energy cycle I had commented in my blog: “The crude oil prices that remained surging since 2002 till date have the days numbered now on account of a definite sign of T+6R (when ‘R’ was placed at a distance of 180 degree from ‘T’) module on the verge of break from July and its final activation from September 08. We can hope for a definite respite from this economic onslaught on the global economy.”
Crude oil price started falling from July 2008 to honor my forecast and kept falling even today except for a small halt in December.
The major question today is how long and to what extent the price would go down! Let us study the crude oil demand- supply scenario on T-A-R Scope. The present operational T-A-R is T5 A91 R91. These T-A-R factors have united focus on the mineral belt of Arab from where Crude oil is extracted. T5 has a positive focus on this belt for greater amount of supply but R+A focus on US economy, China, Japan, European economies are adverse fro proportionate demand to support price rise except on specific periods. A live example can clarify the present scenario. In 1997-98 when crude oil price had touched its bottom of $11.56 and $11.24 faced similar though not exactly the same T-A-R capsule. T93 A91 R6 capsule operational in 1997 ruled to have direct impact on the crude oil bastion of Arab countries resulting in continuously fall in its prices from January 1997 to June 1998. In April 1998 the T-A-R capsule had changed into T1 A93 R6, which had no adverse impact on Arab countries except in the month of November -December 1998. There was a net fall of 57% in crude oil price in June 1998 over 1997 price. If we compare the present downfall this has come almost at par with 1997-1998 fall in crude oil price.
2009 oil Trend under TAR-scope
The present T-A-R capsule operational from January 2009 is T5 A91 R91. These T-A-R factors individually has direct and indirect impact on the Arab world, which produces oil for the world and the American and Chinese economies that consume it the most. R+A in C91 is the worst energy capsule to degenerate the oil demand. As a result of this the efforts of OPEC and other producing countries of the world will not be able to sustain the higher production and will necessarily have to keep their production lower to match the falling price. From May to August there is a divergence of ‘R’ and ‘A’ temporarily to have an impact in May-June 2009 to create demand for oil to raise prices of crude oil by average 10%. By September 2009 ‘T’ also will lose its contact with Arab countries to end the oil pressure. T6 +C from 16th September to October 2009 will have contact with R+A in C91 that will again put the price at lower end. However, the crude oil price will go up by November-December to touch $27/b in average. The oil price is likely to hover round in between $27-$32 per barrel from $37/b level. The following chart will present an annual movement as an indication.
2009 T A R
T5 A91 R91
T6.8 A92.5-7 R91
.12.14 Zone C9 C9
01.13 Cc $37/b on 14.1.
.01.14 C91 R+A+C Downward price
.to 02.13 -15%
.02.14 C92 T+6C Overall downward trend except last part
.03.13 +8.7%
.03.14 C93 Up trend first week and last week
To .04.13 -3%
.04.14 C1 Downtrend except last week
.05.13 -6%
.05.14 C2 T-3C Uptrend first week
.06 14 R-4C +10%
.06.15 C3 Downtrend except last of June
.07.16 -3.5%
.07.17 C4 R+6C Downtrend
.08.16 Confused period
.08.17 C5 T+C/T-C Small downtrend
.09.16 -4%
.09.17 C6 T+C,R-4C/A-4C Downtrend except the first part
.10.16 +6%
.10.17 C7 Downtrend
.11.15 -8%
.11.15 C8 T+2C Mixed trend
.12.13 +5%
.12.14 C9 R+C Uptrend
.12.31 +3%
This is an indication based on T-A-R analysis and should be used cautiously for any practical purpose. This will be subject to revision every month as the time rolls. However, I don’t take responsibility for any loss in the trading by using these indications.
