Oil Seasonalities

With gas prices steadily rising in recent weeks, drivers are nervously watching movements in crude oil and hoping that last week's sell-off is the beginning of a trend rather than a just a quick pullback. Unfortunately, if crude oil's seasonal pattern over the last 25 years is any indication, we shouldn't expect any relief until September. The chart below shows the average YTD percent change in the price of crude oil over various time periods. For each period, we also show the date the high was reached. As shown, over the last twenty-five (9/30), ten (9/19), and five (9/22) years, the price of crude oil has typically peaked in mid to late September.

click to enlarge

Comments

[RiskReturnOptimizer]

Very interesting.

Supports my thesis of long XLE, hedged with short XLY (consumer discretionary) for the medium term. If gas prices keep going up until Sept, this pair trade will deliver great risk-adjusted return.

Also, it protects against other potential negative surprises for US consumers (e.g., unemployment rate trending towards peak > 10.4% as in stress test; savings rate increasing toward long term average of 8%, etc).

2009 May 18 12:22 PM

[The Aft Deck]

Oil is a scarce resource and global demand seems to be picking up, coupled with an increasingly weak dollar Oil should be over $70 brl by Sept

2009 May 18 02:07 PM

[Henrique Simoes]

I am a full time Oil Futures trader and I am shorting the market here.

Underlying conditions are not supportive of higher oil prices and the market is way overbought.

I have been posting my trades in real time in my blog,

oiltradersblog.blogspo...

Have a good trading day.

2009 May 18 02:30 PM

[one eye]

The Market is way overbought and will stay that way.

Gasoline draw will be far greater than anyone forecasts.

Expect more travel out of the Cities this weekend than previously anticipated as well.

2009 May 18 04:39 PM

[one eye]

What would your graph look like if last year's Plunge was excluded in its entirety, treated as an anomaly, so to speak?

2009 May 18 07:18 PM

[Maha Lesch]

I would not think of oil in the context of an average behavior over the past 25 years, I would think of oil behavior in the context of a bear market average behavior and for this situation in the context of current declining demand and the speculators dominance of the market. For the short term oil will correlate with the market which is in a state of losing momentum/overbought position. In the intermediate term building inventories and yes, the capacity rebound of OPEC on the first sign of rising prices both will halt oil constant climb, coupled with global declining demand at least for the near future. There is some signs of global economic improvement but lets be cautious here and not to assume anything. OPEC members especially Saudi Arabia depends on oil to supply the national income in a country that does not have income taxes or better means of supplying income. This put some pressure on how far it can cut its supply, a fact well known by the market, the spiral effect that occurs when prices start crossing a certain line is simply a reflex of the Saudis to continue supplementing their income through increasing their oil supply to the maximum that the market can absorb at then current prices. The same applies to other Gulf States producers.

2009 May 18 08:03 PM

[one eye]

Henrique: How's your Short holding up?

2009 May 20 04:21 PM