Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Crude Oil Prices and the 2019 Hurricane Season

Commodities / Crude Oil Jul 10, 2019 - 04:50 PM GMT

By: EWI

Commodities

In May, the National Oceanic and Atmospheric Administration predicted a near-normal 2019 hurricane season, which runs from June 1 to November 30.

But, the season got off to an early start with the short-lived sub-tropical storm Andrea on May 20.


On May 31, a financial website mentioned this early start as part of a larger warning to commodity traders (Marketwatch):

Storms in the Atlantic Ocean weren't a major worry for the commodities markets in 2018, but this year's hurricane season, which has seen an early start, may rattle traders'; nerves.

Of course, the presumption is that commodity prices, including oil, react to the impact of hurricanes.

However, you might be surprised to learn that this is simply not the case.

Consider Hurricane Katrina, a historic category 5 hurricane which hit the Gulf states in 2005.

Here's a description from the internet 11 years after Katrina made landfall:

Katrina shut down 95% of crude production and 88% of natural gas output in the Gulf of Mexico … thus having a major effect on oil prices.

The conventional wisdom says that such a disruption in "supply" would cause oil prices to skyrocket.

But, this chart and commentary from Robert Prechter's 2017 book, The Socionomic Theory of Finance, reveals what really happened:

The chart shows the day this event occurred: August 29, 2005, right at a top and just before a three-month oil-price slide of over 20%. A record-breaking, surprise disruption in the supply of oil failed to make oil prices zoom. On the chart, it even looks as if somehow the event made prices fall. According to Econ 101 the market's reaction makes no sense. … The historians who described Katrina's "major effect on fuel prices" must have figured that a disaster of such magnitude simply had to have a long term impact on oil prices, so they just said it. Their devotion to exogenous-cause logic obscured their perception of actual history.

Hurricanes are not the only reason for disruptions in the supply of oil. Sometimes disruptions are man-made.

For example, on July 2, a financial website mentioned the "extended OPEC-led production cuts." Again, the conventional wisdom says that prices should jump on this news. Yet, crude was down almost 5% on July 2!

The takeaway is that crude oil is not subject to the economic law of supply and demand, but instead is internally regulated and governed by the Wave Principle.

Elliott Wave International's July Global Market Perspective, which regularly covers the oil market, noted:

You [don't] need to know the news in advance to anticipate the move [in oil's price] -- just the insight that Elliott wave analysis offers.

The bottom line: It's a myth that supply and demand regulate oil prices.

There are several more market myths, which you can read about in the free report, Market Myths Exposed.

This article was syndicated by Elliott Wave International and was originally published under the headline Oil Prices and the 2019 Hurricane Season. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 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