If analyzing what I see on crude oil’s continuous monthly chart and blocking out all other information, I still see a major (long-term) downtrend. The spot-month contract completed a bearish 2-month reversal during November, not surprisingly followed by a recovery rally during December. Based on this chart, and using the May 2020 low as a starting point for the previous major uptrend (setting aside the anomaly of the April 2020 fall to negative prices), then the downside target area for crude oil is between $59.69 and $51.74. I’ve heard a lot of analysts talking about their outlook for crude oil in 2022, and few, if any, are bearish.
If I build in some other data my bearishness becomes more cautious as well. The market’s forward curve remains inverted (in backwardation) as far out as one wants to look indicating a long-term bullish supply and demand situation. Seasonally crude oil tends to put in its calendar-year low weekly close during January, the first week for the 5-year index and the second week for the 10-year. Given this, if the market were to extend its recent secondary (intermedate-term) and major downtrends, it would take a contra-seasonal move. And historically, these tend to occur with a change in underlying fundamentals. Such a thing is possible in early 2022 though it might have to take the form of increased production from OPEC.
