As a chartist, I can’t help but join in the debate over how high the price of global crude oil will reach in this global environment. The Edge wishes me to write more on the fundamental side of the story. But I feel that there are too many expert opinions already dominating the newswires worldwide.
I have dealt at length with the fundamentals and technical analyses (charting) for the past few years in a series of articles/commentaries (see http://arifinedgearticles.tripod.com), starting with “Flirting with the US$60 a barrel” at a time when crude oil hovered at around US$50 a barrel. Subsequently, I said US$80 would be the next level, to be followed by US$124 a barrel. But what surprises me is how swift the price went up after hitting the US$80 mark.
My earlier presumption was that if the US-Iran conflict escalated, it would provoke what certain parties termed a potential World War IV (the Cold War being World War III). But it seems that the actual causes are emanating from the world’s No 1 economic powerhouse itself, and the reasons are mostly financial and economic in nature.
The subprime crisis may linger on (it may become more severe than what we experienced during the 1997/98 Asian financial crisis), while the constant weakening of the dollar is arguably the real pain for many. It baffles me why the world keeps on trading in US dollars.
The latest story from Bloomberg (at the time of writing), “Oil tops US$117 after Opec says output stays”, sums it up. The statement by the secretary-general of Opec, Abdalla Salem El-Badri, that there is no shortage of oil in the market has added insult to injury. He blames the weak dollar and speculators for the high prices.
Yes, the Western world in particular will suffer, and so will the world at large. The “weak dollar” argument, I think, should hold water. Isn’t there any solution on the horizon? Some have argued that the world should start trading in other currencies — the euro/yen or even the dinar, for instance. In the first place, much of global oil output comes from the Middle East.
Speculators at large are the perennial scapegoats, so to speak. But these “goats” are slurping the massive dollars being churned out at the oil rigs and petrol pumps. We have watched television dramas like Dallas where people like J R Ewing (Dallas), with their cunning ways, were able to manoeuvre profitably in the oil markets.
In the real world, there are the super majors and other oil barons to contend with. We can’t shake them off because they are the foundation of capitalism as we know it today. Neither can we shrug off the New York Mercantile Exchange — the mecca of futures trading in crude oil.

The technical picture
Being an economic chartist, I have to throw in some of my thoughts with regard to the crude oil price scenario/forecast, viewed through a chartist’s futuristic, (perhaps) mirage-like images.
So, is crude oil on the way to US$125 per barrel? That’s just the immediate term scenario. Bear in mind that the chart (above) depicts daily averages for spot prices of West Texas Intermediate.
Bill Farren-Price, director of energy at London-based Medley Global Advisors, says, “The price seems to be rising inexorably towards US$120.” Is it unreasonable? Anyway, it is within a whisker of happening! Now the world is convinced that cheap oil is a thing of the past. I remember people laughed at me when I talked about oil at US$60, then US$80 and US$124. But I feel that’s what forecasting is all about.
Now back to my chart, which tells me something different. The price is going to reach US$125 a barrel and maybe more. And the rise will be swift. It may even touch US$170 a barrel in the medium term — the forecast is pegged at the 4.25 times fibonacci level; (just) imagine what will happen if the dreaded 6.85 times level is reached. That’s how we chartists mark the price levels on our charts.
I am not going to have a concluding statement in this brief commentary. Suffice for me to say that a Goldman Sach’s article a few years back painted an eerie and alarmist scenario. Personally, I think we should be prepared to live in a US$97 to US$100 a barrel global environment — and with it, higher costs of living. No two ways about that eventuality. It is already here, and it’s here to stay.

Arifin Abdul Latif is Perak state director of agriculture and an economic chartist