Oil Price

The last post on the oil price was back on May 23, when it was argued that oil was vulnerable on a
seasonal basis. Oil did enter a seasonal decline and it was also mentioned that the bulls might wait
until the end of July before dusting off the chart. So, here we are.

There are things about the spring - early summer weakness in the oil price that are a little bit
disconcerting. First, long side speculative interest in oil when the price rallied up near $50 bd. was
very nearly at record levels. Bullish, money down sentiment was way too strong in a market when
the fundamentals suggest a careful, tentative approach to rallies in view of continued sizable global
inventories. This may have set the market up for a larger than expected seasonal flop of  nearly 20%.
Second, the intermediate term weekly chart showed the first nearly strong overbought for oil in
several years. $WTIC Weekly Third, the MACD reading has turned negative, and the 40 wk. m/a
no longer supports a rising market. Since Aug. can be a choppy month seasonally, long side traders
may hold off on significant new commitments until later this month. It may also be the case that
the Brexit induced rally in the US dollar bothered oil players.

The recent heavier than expected pressure on the oil price as speculative longs are run off suggests
that even if oil gets its big and final annual seasonal lift over Sep. - mid-Oct., the price recovery may
well fall sharply short of the $60 level that looked like a 'do' earlier this year.