Best of the Week
Most Popular
1.North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - Nadeem_Walayat
2.Researchers Find $10 Billion Hidden Treasure In A Dead Volcano - OilPrice_Com
3.Gold and Silver : The Battle for Control - Rambus_Chartology
4.Asda Sales Collapse and Profits Crash! UK Retailer Sector Crisis 2017 - Nadeem_Walayat
5.Deep State Conspiracy or Chaos - James_Quinn
6.The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - Plunger
7.Gold Stocks Coiled Spring - Zeal_LLC
8.Neil Howe: The Amazon-Walmart Rivalry Will Determine the Future of Retail - John_Mauldin
9.Crude Oil Price Precious Metals Link in August - Nadia_Simmons
10.Gold and Silver Precious Metals Nearing Breakout - Jordan_Roy_Byrne
Last 7 days
Seeking Confirmations – US Stock Market - 21st Aug 17
The changing demographic of online gamblers - 21st Aug 17
Gold is a coiled spring… the breakout is here, fundamentals are in place, technicals are compelling - 20th Aug 17
A Midsummer Night's Dream: Buy Gold and Silver - 20th Aug 17
Gold Mining Stocks 2017 Fundamentals - 20th Aug 17
EIA Weekly Report and Crude Oil - 19th Aug 17
4 Insights for Adjusting Your Portfolio in a Rate-hike Environment - 19th Aug 17
Gold Direction Indicator - 19th Aug 17
Historical Inevitability and Gold and Silver Ownership - 19th Aug 17
You Are Being Lied To About “Low” Gold Demand - 19th Aug 17
This is Why Cocoa's Crash Was a Perfect Setup - 19th Aug 17
Gold, Silver Consolidate On Last Weeks Gains, Palladium Surges 36% YTD To 16 Year High - 19th Aug 17
North Korea Is Far From Being Irrational… It Has A Plan - 18th Aug 17
US Civil War - FUNCTIONAL ILLITERATES TRYING TO ERASE HISTORY - 18th Aug 17
Bitcoin Hits New All-Time High Over $4,400 As It Catches Paypal In Total Market Cap - 17th Aug 17
3 Psychological Ingredients behind Great Web Content - 17th Aug 17
The War on Cash - Rogoff, Orwell and Kafka - 17th Aug 17
The Stock Market Guns of August, Trade Set-Up & Removing your Rose Tinted Glasses - 16th Aug 17
Stocks, Bonds, Interest Rates, and Serbia, Camp Kotok 2017 - 16th Aug 17
U.S. Stock Market: Sunrise ... Sunset - 16th Aug 17
The Next Tech Crash Could Delay Your Retirement by a Decade - 15th Aug 17
Gold and Silver Precious Metals Nearing Breakout - 15th Aug 17
North Korea Showdown: Pivotal Market Turning Point - 15th Aug 17
Tech Stocks DOT COM Bubble Do-Over? - 14th Aug 17
Deep State Conspiracy or Chaos - 14th Aug 17
From the Trans-Atlantic Axis and the Trans-Asian Axis - 14th Aug 17
Stock Market Intermediate Correction Underway - 14th Aug 17
The Islamic State Jihadi Pivot to Asia - 13th Aug 17
Potential Pivots Upcoming for Stocks and Gold - 13th Aug 17
North Korean Chinese Proxy vs US Military Empire Trending Towards Nuclear War! - 12th Aug 17

Market Oracle FREE Newsletter

3 Videos + 8 Charts = Opportunities You Need to See - Free

Crude Oil Price Bottoms and Blues

Commodities / Crude Oil Feb 05, 2016 - 04:52 PM GMT

By: DeviantInvestor

Commodities

Crude oil prices have dropped from about $106 in June of 2014 to briefly under $30 in January of 2016 – down about 74% peak to trough.  This appears to be an on-going disaster for oil companies, the banks who loaned money to frackers, oil exporting countries, global stock markets and others.

Conventional wisdom suggests that crude oil prices will stay low for a long time because of low demand (global recession), huge supply (Iran, fracking, etc.), decline in commodity prices globally, and at least ten more reasons.


Maybe!

But crude oil prices have crashed before and then rallied.  Examine the following chart and the 4 step sequences shown.

Note the following “1” to “2” down legs shown on the chart.  They are:

Date                      High (1)                Low (2)                 % Drop      

9/90 – 4/94            40.10                    13.90                    65%

10/00 – 11/01       36.90                    17.12                    54%

7/08 – 12/08          147.20                  35.35                    76%

6/14 – 1/16            106.83                  27.56                    74%

Note that crude oil has crashed before, and probably will again.  But it has also rallied after crashes and probably will again.  Note the following rallies:

Date                      Low                       High                      % Rally      

4/86 – 8/87           9.95                       22.03                       121%

6/90 – 9/90           16.57                    40.10                       142%

12/98 – 10/00       10.75                    36.90                       243%

1/07 – 7/08           51.00                    147.20                     188%

12/08 – 11/09       35.35                    89.90                       154%

1/16 – ?                 27.56                    ?                              ?

 

There have been several substantial rallies from deeply oversold conditions over the past 30 years.  At each of those lows I think there were many good reasons why crude oil had crashed and would stay low for years — just like now.  And yet crude oil prices rallied, in spite of those many good reasons.

What about Cycles in Crude Oil Prices?

Note that in the graph above the #2 bottoms have been circled with green ovals.  Examine the next graph with the 88 month cycle lows shown with green ovals.  The bars are compressed slightly more but the #2 bottoms are the same.

There have been six important crude oil bottoms in the last 30 years.  Five of those six important lows occurred close to the 88 month cycle bottoms indicated by green ovals and purple vertical lines.  The low in 1998 was mid-cycle.

The green ovals and vertical lines as drawn indicate a crude oil price low is due about now.  Given that the cycle is 88 months long – more or less – that probably means the low is due in anytime in 2016Q1 or 2016Q2, and perhaps it has already occurred.

What could cause a bottom to occur now and crude oil to rally or fall further from here?  Well, there are many possibilities.  Consider the reasons for and against a rally from here as listed in:  60 Reason Why Oil Investors Should Hang On from Zerohedge.

From Peter Schiff:

“The bust in commodities should only last as long as the Fed pretends that it is on course to continue raising rates.  When it finally admits the truth, after its hand is forced by continued market and economic turmoil, look for the dollar to sell off steeply and commodities and foreign currencies to finally move back up after years of declines.  The reality is fairly easy to see, and you don’t need an invitation to Davos to figure it out.”

My Opinion:  We will see more currency devaluations, based on 100 years of history, and we will see central banks “doing something” to levitate the stock and bond markets, based on decades of history, and we will see bankers taking care of themselves and the political elite, based on thousands of years of history.  Expect higher crude oil prices – eventually – and expect more currency devaluations and higher gold and silver prices in 2016 and 2017.

Expect bankers and politicians to do what they do, and expect gold and silver to protect us from their machinations.

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2016 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife