About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Thursday, March 29, 2012

Oil Price

Traditionally, the oil price experiences its longest and deepest period of seasonal weakness
between early Oct. and mid - Dec. The market tends to rally around the new year, but often
weakens again through the end of Feb. The latest Oct. - Feb. interval saw a powerful counter-
seasonal move with the price rising from $75 bl. to $110 before settling down in recent weeks.
The trading pits did an amazing job of kiting "bomb Iran fever" into an exceptional price rally.
The traders likely made good money and I guess Iran did, too. Recently, both the CIA and Israel's
Mossad have come out to pooh pooh the idea while the Saudis have decried the run up in the price  as econmically dangerous and have even reminded folks they have spare capacity. Now, we also have renewed chatter about western countries tapping strategic reserves to curtail the sharply rising
gasoline price.

The oil price has faded modestly recently because the attack Iran senarios are fading in
popularity and it suddenly seems like a less likely event. The interesting issue here is that Mar.
and Apr. normally represent very strong seasonal months for oil as gasoline refining expands
and inventories are built ahead of the peak driving season for the northern hemisphere.Recent
oil price action shows the market is again moving in a manner out of synch with the seasonals.

From a fundamental point of view, I have been thinking of oil in 2012 trading in a range of  $80 -
$100 bl. The market has made a liar out of me already, but the chart link ahead is signaling that
oil might have further downside despite the current positive seasonal bias. At this point, I am
guessing that if oil drops further to around $85 - 90 by mid - year I might give it a look as a
long position. I have stayed away from this market since the "bomb Iran" drumbeat started
because I have been figuring one almost needs insider knowledge of the antagonists as well as
the big boys in the trading pits to have an edge. For now, I'll bide my time. $WTIC

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