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A New World Emerges as Energy Demand Destruction Moves Forward
Today, we will not talk about how precise our e-globalTrading energy forecast was, despite it was extremely precise discovering a lot of small technical clues, very well in advance of the current energy meltdown; no, that will not be the point right now.
What everybody wants to know is how deep we can go and for how long. That’s the key topic to be addressed today.
The absolute answer can be only responded by Mr./Mrs. COVID 19, but we can help you to have a very realistic idea about where our next stop station will be located. Last week, we showed you a couple of very relevant oil price demand areas on the corresponding CLc1 crude oil future contract, monthly time frame chart.
Unfortunately, as predicted, one of them was already passed through last week. By the way, it was broken down very easily; we are talking about the 26 US$ level, which was broken last March 18th.
The referred technical base support was formed on January 2016, after the 70 US$ big fall, which was successfully called-out by e-globalTrading in October 2014.
That huge oil-triggered energy down move was a consequence of several fundamental bearish factors: an important shale gas supply, a tremendous dollar strength, and a negative technology-influenced labor market scenario.
Note that 4 years later, all those factors are still in place, and some of them showing even more impact, like the current overwhelming energy over-supply situation.
Finally, COVID-19 added an additional super bearish factor literally destroying global demand in matter of days, to send oil and derivatives in free fall without any serious attempt to absorb the overwhelming supply.
As you can observe from our e-globaltrading SILVER report (not shown), Natural Gas is also at record lows, NAPTHA in free fall and showing multiple SELL Alerts, at 254 U$S, and Etylene at 10 cts/pound! Yes, 10 cts/pound!
Polymers are also showing no support, as up-stream continues pushing down the whole petrochemical chain. PE in China is heading lower again, and PVC is definitely trying to break-down under a key technical support at 6000 RMB.
The second question was for how long, right?
Well, medical experts say that COVID 19 crisis will last until vaccine is discovered and massively applied, which it seems to be a 9-12 months period. That’s obviously terrible for the global economy. As we discussed last week, the global debt is the enemy, public and private, corporate, and individual.
Global systemic default scenario will probably drive us to the more or less same 2008 financial crisis scenario, but with a big difference now. Governments are much more in debt than in 2008; so, if the world doesn’t find a compromise between debt and activity, corporate and individual, we will probably face very hard times.
As we expressed in 2012, maybe we will have a new game, with new cards and new rules, because we should do exactly what we didn’t do 10 years ago after the financial crisis was over. Perhaps, we have to re-define demand and supply, prices and costs for every product and service.
Finally, DXc1 Dollar INDEX is now showing a multi-year high at the 103-104, also showing multiple e-globalTrading SMART Alerts demonstrating strong momentum into resistance.
If the referred 104 is finally broken, US Dollar will be consolidating its prevalence over the rest of the currencies, with the obvious bearish implications on commodity prices.
As a final comment, monetary stimulus is what financial markets were expecting to be announced, but financial markets also know what the cost of those solutions is: more fuel to be added to the unsustainable debt balance and fiscal negative scenario. So, don’t expect miracles generating demand. All bounces will probably be short, covering rallies for now.
Let’s see what happens this week.
Ed R. Gils
TradingVest USA President & Financial Markets Specialist-Energy and Derivatives
Charts and Data provided by MetaStock; Alerts provided by e-globalTrading, a TradingVest USA Business Division
