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Yes it was a major headline last week and I have only one word for it – blah.
Well not in the short to medium term are we likely to see that level. This sort of headline sells papers. And we all know that oil may get to these levels but a lot can happen before it gets there – and it is all in the timing!
Let’s take a look at my trusty Elliott projections:
Chart 1
click chart for more detail
You can see in the 30 week chart that the wave five projections range from about US$138 for the first wave to almost US$180 for the third wave five.
We know from anecdotal experience the first wave five has a very good chance of being met – let’s say even 70% and then the probability wanes from there. The chances of the third wave five being met is somewhat slim – but only in the context of the time projection – which is first quarter 2009.
That is a year away and over that time much can change – and not the least is a dip along the way. But you will note the dip is back to US$110-100 which is still extremely high compared with the US$60/barrel only a year ago.
US$100 is still very high and motorists will find it all very painful. If oil was to go to say US$140 a barrel that will certainly stoke inflation globally but if it was to stay at that level in 2009 it would not be inflationary as inflation is a year on year calculation.
But it would still not be nice - unless you are an oil producer and even then I am not sure you want US$200 a barrel.
Enjoy the ride
Tom Scollon
Chief Analyst
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