With 2018 winding down it is an excellent time to reflect on what went right and what went wrong during the year when it comes to our trading and investing activities. The crude oil market was a tale of two trends in 2018. The energy commodity made higher lows and higher highs starting in February 2016 when the nearby NYMEX futures contract traded to its lowest price since 2003 at $26.05 per barrel. This year, the pattern continued through early October when the price rose to a high at $76.90, which was almost triple the level seen less than three years before. The bullish trend came to a screeching halt as U.S. production rose to record levels and inventories began to pile up.
Moreover, pressure by U.S. President Donald Trump on the Saudis to increase their output and exemptions from sanctions for eight nations buying Iranian crude caused a cascade of selling that took the price below $50 per barrel to a low of $49.41 in late November. The correction of over 35% in less than two months turned the bull into a bear, and as Monday, December 17 nearby crude oil futures were not far above their recent lows as they traded to a low at $49.86 per barrel on the active month January futures contract on NYMEX.
The price destruction in the oil market combined with selling in the stock market has done lots of damage to the share prices of companies involved in all aspects of production, exploration, refining, and logistics. Valero Energy Corporation (NYSE:VLO) has been hit particularly hard by the double-whammy of selling in stocks and oil. While the Energy Select Sector SPDR (XLE) has dropped from $78.36 in early October to its most recent low of $61.51 or 21.5%, so far, the price action in
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