Friday, March 12, 2010

Crude Oil - Long term forecast - Extract from our Special Report

This is a long term analysis of crude oil using cycles like the Kondratieff Cycle, the commodity cycle and the interest rate cycle which all seem to have an approximate 54 year life span. In addition, I use Elliott Wave Theory which is based on the psychology of the masses which forms patterns. I use these patterns as well as the general sentiment in my forecasting.               

I begin by looking at commodities and crude oil's long term price patterns. The charts spanning centuries reveal interesting structures which give an idea about the future of crude oil and related commodities. 
Long term wave structure in commodities:

Source: March Faber and Stifel Nicolaus
The next top in the commodity cycle should come in the middle of the 2030's, this should complete a 5 wave structure up which had begun in 1896. From the middle of the 2030's we expect a long term decline that should last until the end of the century.           

Crude Oil 
Long term structure

We can identify a large triangle in crude oil from the middle of the 19th century that lasted until the early 1930's. We have labelled this as wave IV of a century structure. A large wave V began in 1930's which is still in progress.                                                                    
Chart of wave V which is still in progress:                                                                                                                         
Source: St. Louis Fed. org.                                    
We think wave 3 of V was completed in 1980. A 4th wave correction lasting 19 years ended in 1999 and since then wave 5 up of V has been in progress.

Crude oil compared to other asset classes                                  
We compare crude oil to metal represented by gold:
Crude Oil / Gold Ratio

Crude oil has outperformed gold since early 2009. However, Crude Oil / Gold Ratio has been in a topping process since the middle of 2009.
Geir Solem
Copyright (C) 2010 all rights reserved

Read more from our Special Report:

- The Kondratieff Cycle, the commodity cycle, the interest rate cycle and their relationship with the long term pattern of Crude Oil.

- Full analysis of the Elliott Wave Pattern in Crude Oil incl. several more charts.

- Revealing the intermediate trend with expected targets. The intermediate trend of Crude Oil in the next few years might be a surprise to many.

- Analysis of Crude Oil and its comparison with a number of other assets classes.

- Timing and Trading vehicles and how to take advantage of the trend in crude oil.

Special Reports can be purchases for USD 35. The reports are free for members. You can order the report from our web site

Best Regards,
EWT Team