The oil price has tumbled as all know, but it has still been following the longer term seasonal pattern.
Oil is now in a respite period in a weak seasonal interval which should wind up around late Feb.
Back on Dec. 23, when WTI oil was around $55, I opined that the lack of a rally then signaled that
oil could fall to around $40 by the end of Feb. '15. before the seasonal rebound period began. Let's
see how that goes. I think oil below $40 in the near future would begin to look like mindless
overkill. Oil supply / demand fundamentals simply do not look that bad especially with the
Eurozone, Japan and China now easing monetary policy. Moreover, the price of crude is now
extraordinarily oversold relative to its 200 day m/a. $WTIC Crude
The longer term uptrend in the oil price has been broken decisively. The US rig count is dropping
off, and crude output may eventually weaken. But the cat is out of the bag here. The oil shale in
the US is still here and there is plenty of it. The technology to retrieve it has developed remarkably
and continues to arc ahead. Others will copy it or buy it. Globally, there may be a lengthy period
before the oil price scales the heights again. But, as ever, there will be trading opportunities with
the next big test set for the end of Feb. if not a little sooner.
- Peter Richardson
- 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 !!!