dinsdag 13 januari 2015

What to look for in buying the dip in oil?

The oil price (OIL) has been plunging very rapidly since December 2014. However, I see light at the end of the tunnel when I look at the forward curves, oil is bottoming out. When we look at the chart below and compare it to the oil price, we see that when the forward curve goes into contango (green), this points to a bottom in the price of oil.We had a peak in 2008, when oil went into backwardation (red curve). Oil plunged end 2008 when oil went back to contango.

Today we are in contango (see chart below from Contango Report): The six month contango = 52.77 - 48.36 = 4.41. This is pretty steep when you look at history.
That means we are very close to a bottom in oil. Every investor is asking himself, when will the oil price bottom out? According to me, there are 3 things to consider when it comes to oil.
  1. Supply and demand
  2. Inflation/deflation
  3. Political events
To read the analysis, go here.

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