Friday, December 19, 2014

Three Reasons Why Crude Won't Trade Above $77.00 Anytime Soon

As you all know, oil prices have plunged lower since June 2014. Many so-called experts such as T. Boone Pickens are predicting oil prices will go back to $100.00 a barrel. Below I will give you three reasons why oil prices will not trade back above $77.00 in the next year and possibly longer.

1. The U.S. Dollar has officially broken out to the upside on the charts and this will keep oil prices in check for a very long time. You see, oil around the world is traded in U.S. Dollars. The U.S. Dollar is considered to be the world's reserve currency. So if you live in Japan and want to buy a barrel of oil you need to convert Japanese Yen into U.S. Dollars before you can buy that barrel of crude. Traders should note that as long as the U.S Dollar remains strong crude prices will remain weak. Just look at the chart below and you will easily see the inverse relationship between the price of crude and the rise in the U.S. Dollar.

2. Other central banks will continue to devalue their currencies for the next couple of years. This stimulus act by the central banks around the world such as the Europe Central Bank(ECB) and the Bank of Japan(BOJ) will help to strengthen the U.S Dollar for years to come. Basically, the U.S. Dollar is strengthening because of all money printing by other central banks. Once again, a strong U.S. Dollar means a weaker price in crude.

3. Many countries including China and the United States have vowed to promote solar and other alternative energy sources. It is easy to see how many people are now driving hybrid and electric cars already. Solar and alternative energy technology continues to improve for commercial and residential use and this should cause the use of fossil fuels to decline. Many countries such as the United States, and Canada have unlimited supplies of natural gas which could also cause put pressure on oil prices for years to come.







Nick Santiago

InTheMoneyStocks