Oil Price

Oil supply and demand have come into reasonable balance in 2016. Unlike prior periods when
there has been an oil price bust, spare capacity at the well head is rather small, although the
Sunni Arab states are working to boost production. The production surge of 2015 has produced
an outsized global crude inventory position, but continued global economic expansion will work
slowly to reduce the overstock.

There has been a vigorous debate for months by oil price observers about the proper direction
the price should take, but given that the glut is largely now related to inventory rather than
production vs. demand, I have based my trading strategy primarily on the seasonal price pattern
for oil. Better lucky than smart is the trader adage that applies in this case.

Oil continues in a strong seasonal uptrend underway since Feb. The 50 day m/a is nicely positive
and has moved above the 200 day m/a and the oil price has been exceeding both. Oil is now
moderately overbought against its 200 day m/a, a situation not observed for quite some time. The
price is also short term overbought on MACD and RSI, although these triggers have yet to work
because of the strength of the positive trend. WTIC Daily

The oil price is now vulnerable on a seasonal basis until the latter part of July when another
period of seasonal strength would be set to begin. Springtime price vulnerability is usually not
that severe, and some players will simply hold on through this interval if basic fundamentals
continue through.