Best of the Week
Most Popular
1. Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - Nadeem_Walayat
2.Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - James Burgess
3.Gold Price Trend Analysis - - Nadeem_Walayatt
4.The Beginning of the End of the Dollar - Richard_Mills
5.Stock Market Trend Forecast Update - - Nadeem_Walayat
6.Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - Troy_Bombardia
7.Precious Metals Sector: It’s 2013 All Over Again - P_Radomski_CFA
8.Central Banks Have Gone Rogue, Putting Us All at Risk - Ellen_Brown
9.Gold Stocks Forced Capitulation - Zeal_LLC
10.The Post Bubble Market Contraction Thesis Receives Validation - Plunger
Last 7 days
BREXIT, Italy’s Deficit, The EU Summit And Fomcs Minutes In Focus - 16th Oct 18
Is this the Start of a Bear Market for Stocks? - 16th Oct 18
Chinese Economic Prospects Amid US Trade Wars - 16th Oct 18
2019’s Hottest Commodity Is About To Explode - 15th Oct 18
Keep A Proper Perspective About Stock Market Recent Move - 15th Oct 18
Is the Stocks Bull Dead? - 15th Oct 18
Stock Market Bottoms are a Process - 15th Oct 18
Fed is Doing More Than Just Raising Rates - 14th Oct 18
Stock Markets Last Cheap Sector - Gold - 14th Oct 18
Next Points for Crude Oil Bears - 13th Oct 18
Stock Market Crash: Time to Buy Stocks? - 12th Oct 18
Sheffield Best Secondary School Clusters for 2018-19 Place Applications - 12th Oct 18
Trump’s Tariffs Echo US Trade Policy That Led to the Great Depression - 12th Oct 18
US Dollar Engulfing Bearish Pattern Warns Of Dollar Weakness - 12th Oct 18
Stock Market Storm Crash, Dow Plunges to Trend Forecast! - 12th Oct 18
SP500 Stock Market Sell Off Well Forecast by President Trump - 11th Oct 18
USD and US Tr. Yields Retreat, GBP Gains on Brexit-deal Report - 11th Oct 18
Loss Of Yield Curve "Shock Absorber" Could Mean A Rough Ride Ahead For Markets & Housing - 11th Oct 18
Just How Bearish is the Stock Market’s Breadth? - 11th Oct 18
Here’s Why Gold Stocks, Gold, and Silver Are Great Buys Now - 10th Oct 18
Russian Ruble Technical Chart Analysis and Forecast - 10th Oct 18
Society Trends To Keep in Mind in the USA - 10th Oct 18
[eBook] How to Identify Turning Points in the Market - 10th Oct 18
Euro Vulnerable as Slowing Growth Reveals Underlying Issues - 9th Oct 18
Construction Companies to Watch For in 2019 - 9th Oct 18
ECB Meeting Minutes and US Inflation Data in Focus - 9th Oct 18
Interest Rate Shock-Time to Find Out Who has been Swimming Naked - 9th Oct 18
Unintended Consequences of Expanding Sheffield's Best Ranking State Secondary Schools - 9th Oct 18
Crude Oil Price Trend Forecast 2018 Update - 9th Oct 18
Inflation Is Starting To Heat Up - 8th Oct 18
Stock Market Seasonal Influence at Work - 8th Oct 18
Barrick Randgold Deal Breathes New Life into Gold - 8th Oct 18
Stock Market Sell Off, Dollar Rally Expected, Now What? - 8th Oct 18
The Chartology of Gold and Silver - 8th Oct 18
The Income for Life Playbook - 8th Oct 18

Market Oracle FREE Newsletter

Trading Any Market

This Single Model Explains Crude Oil Price Swings

Commodities / Crude Oil Mar 24, 2017 - 12:26 PM GMT

By: John_Mauldin

Commodities

BY JARED DILLIAN : One of the things we learned when oil collapsed a couple of years ago—something I’ve written about previously—was that there was a positive feedback loop embedded in declining oil prices.

Basic economic theory would tell you that as the price declines, so does oil supply. But the opposite turned out to be true. The rice went down, and people pumped more!


Take a look at a chart of WTI.

See how oil takes a while to go up, but goes down in a hurry? Traders call this “going up on an escalator, down on an elevator.”

But this isn’t usually the case with commodities. The high-velocity move tends to be to the upside—especially given geopolitical risks. Iran does something bad, and the price of oil gaps up three bucks.

The Price Action Has Totally Reversed

Oil has been in a bear market for a while now, and just because it bounced from the panic lows does not mean that the bear market is over.

Disclosure: I am a bit of a permabear on oil. It’s easy to be a permabear on commodities. Being a bear on commodities is like being a bull on the human spirit.

Back to oil. We literally have it coming out of every orifice because of human ingenuity. Because of one very simple invention: learning how to drill sideways.

Do you remember your elementary school textbooks that said the world would pretty much be out of oil by the 2000s? That we only had 20–30 years left? Those textbooks told me we would run out of oil in our lifetime.

Bzzzt, wrong answer.

Now we have a few hundred years’ worth. My guess is that it will last longer than that. As for alternative energy, we will use it when it gets cheaper than fossil fuels and not a moment sooner.

I have no position in oil, but on balance, my portfolio stands to gain if it declines further.

Gasoline is cheaper than water. Does that make you mad? It shouldn’t. It should make you stand there, mouth wide open, and gawk at the miracles of capitalism.

Grab the Exclusive Special Report, The Return of Inflation: How to Play the Bond Bear Market, from a Former Lehman Brothers Trader

Don’t miss out on this opportunity to cash in on the coming inflation.

Jared Dillian, the former head of Lehman Brothers’ ETF trading desk, reveals why inflationary price increases could be much higher than 1% or 2% and how you can position yourself for big profits as the bond market falls.

Download the special report now. 

John Mauldin Archive

© 2005-2018 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

6 Critical Money Making Rules