The recent Opec-inspired rally in crude oil and the other energy markets has now produced top extensions in some of the energy and oil-and-gas related equity instruments:
These are only at a daily scale for the moment but it does indicate that this rally in energy markets is on a poor footing. Opec is not the force it once was long ago and the chances of a ‘spike up’ to $80 a barrel or higher seems remote. We continue to believe that oil prices are in a trading range bounded by the mid-$50s and low $40s and would trade accordingly in crude itself and in related markets. These top extensions may be all the signal we get that the time to sell has arrived, but think carefully before acting. Prices may make several attempts to push through the high end of the range before (as we expect) failing, so only sell rallies.
If we see signals in the energy contracts themselves, we will become more aggressive in our recommendation.
