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Energy Volatility: What to Expect Next

Our Chief Energy Analyst talks about what he’s looking at across the energy markets

by Alexandra Lienhard
Updated: April 12, 2017

In this new interview with Steve Craig, the Editor of our Energy Pro Service, he explains that when looking across the energy complex, 2017 is playing out according to his Elliott wave script.


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[Editor's Note: The text version of the video is below.]

ALEXANDRA LIENHARD: Steve Craig, Elliott Wave International's Chief Energy Analyst and Editor of EWI's Energy Pro Service is joining me today by phone to talk a bit about what he's looking at across the energy markets. So Steve, with Syria back on the front burner, oil volatility seems to have picked up, and you've been in the energy markets for decades. So in your view, is there any consistency in how oil reacts to the Middle East, specifically?

STEVE CRAIG: Hi Alex. That's quite common to see markets react to news, particularly anything attached to the Middle East. But reactions to news they almost always tend to be fleeting, and it's generally only a matter of time until the dominant trend re-exerts its influence.

ALEXANDRA LIENHARD: So given that, do you ignore the news or simply avoid it from a forecasting perspective?

STEVE CRAIG: Sure. I pay attention to the news, but I would never use its presumed cause or effect as a factor for a price forecast. You can't predict the news, much less how the markets may react. News is really just part of the fabric of the markets, and it can always be explained within the context of the Wave Principle. Whether it's clear at the time or not.

ALEXANDRA LIENHARD: So Steve, when crude was range trading in Q1, you maintained that it would eventually break lower and you were correct. Nice call. So is 2017 still playing out according to your script?
STEVE CRAIG: So far, yes. The advance from the February low was predictable in that the market had completed a five-wave decline. The rally should be a counter-trend affair, and once complete, the larger downtrend should carry prices substantially lower.

ALEXANDRA LIENHARD: Now are any of the other markets you followed likely to see heightened short-term volatility based on the Middle East, or is it mainly just crude that has these kind of knee jerk reactions?

STEVE CRAIG: Well, crude is almost always the driver and the products tend to follow, although it's not necessarily in lockstep.

ALEXANDRA LIENHARD: And what about the ETF for crude and natural gas? Are they still tracking the underlying closely?

STEVE CRAIG: ETFs are a great tool for those that don't want to assume the risk inherent in a leveraged futures contract. I follow the UNG, which follows natural gas quite closely, and I follow the USO for oil. Both contracts really tend to mimic the price action in the futures market. And again, I think they're just great trading vehicles and ones that the public has certainly come to accept.

ALEXANDRA LIENHARD: Steve, thanks for talking today and offering this preview. With Elliott Wave International hosting its popular Pro Service Open House, offering free forecasts for over 50 markets. It's been great to get a little insight into the energy markets you cover. Thanks.

STEVE CRAIG: Sure, Alex. Any time.