Trump may succeed in pushing down oil and gas prices after all
President Trump has said gasoline prices are too high. He asked Saudi Arabia to increase its oil output by two million barrels. People who understand the industry immediately said there was no way the Saudis would raise its output because that would lower prices and profits.
Now the news is that Saudi Arabia is offering extra oil to some Asian customers. You don’t have to be a genius to infer that Saudi Arabia is indirectly complying with Trump’s request. In addition, with some help from Russia, Trump may succeed at lowering gasoline prices. Let’s examine the issue with a chart.
Please click here for a chart of oil ETF USO, -3.47% The USO chart is being used instead of oil futures CLQ8, -4.08% because most investors do not trade futures. Oil ETFs such as Velocity Shares 3x Long Crude Oil UWT, -10.54% Velocity Shares 3x Inverse Crude Oil DWT, +10.10% and ProShares Ultra Bloomberg Crude Oil UCO, -7.00% are popular, but it is better to use USO for analysis because it is not leveraged and is highly liquid. Please note the following from the chart:
• The chart shows the recent oil breakout.
• The chart shows the downgrade of oil by The Arora Report. The Arora Report ratings on oil and other indicators on oil are widely followed.
• The chart shows the signs of an oil rally failing.
• The chart shows oil fell below the support on heavy volume.
• The relative strength index (RSI) shows that oil is oversold and a short-term rally can ensue.
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Here are our current ratings on oil.
Short-term: Mild negative.
Very long-term: Negative.
The Arora Report follows a large number of indicators on oil; here are the main ones.
• Geopolitics: negative.
• Sentiment: very positive.
• Fund flows: very positive.
• Supply: positive.
• Demand: negative.
• Inventories: mild negative.
• Positioning: very negative.
• Technicals: mild negative.
• Risk appetite: strong positive.
• Economic indicators: positive.
• Currencies: negative.
The Arora Report reduced its position in oil service ETF OIH, -1.52% Positions should be reduced in ETFs such as SPDR S&P Oil & Gas Exploration & Production ETF XOP, -2.43% SPDR S&P Oil & Gas Equipment & Services ETF XES, -2.08% and SPDR Select Sector Energy ETF XLE, -1.31%
As a side note, The Arora Report exited the position in natural gas ETF FCG, -1.86%
The Arora Report reduced positions in Halliburton HAL, -1.37% Royal Dutch Shell RDS.B, -2.11% and Oasis Petroleum OAS, -5.10% Positions should be reduced in Exxon Mobil XOM, -1.02% Chevron CVX, -1.29% Schlumberger SLB, -1.03% and Baker Hughes BHGE, -0.80%
The Russian economy is highly dependent on oil. Previously The Arora Report downgraded Russia stocks and called for taking profits on Russia ETF RSX, -0.05%
Profits should have also been taken on Saudi Arabia ETF KSA, +0.80% and Middle East Dividend Fund ETF GULF, -0.83%
Disclosure: Subscribers to The Arora Report may have positions in the securities mentioned in this article. Nigam Arora is an investor, engineer and nuclear physicist by background who has founded two Inc. 500 fastest-growing companies. He is the founder of The Arora Report, which publishes four newsletters. Nigam can be reached at [email protected]
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