When to get excited about oil

Oil is seeing a technical bounce, but now isn't the time to buy.

Transcript

00:00 Brent crude futures hitting their lowest level

00:02 since at least August this week.

00:04 Do you expect that downturn specifically

00:06 and a bit of that downward pressure to continue?

00:08 - When oil started to rally on news of violence

00:13 in the Middle East, it failed to break above 95.

00:16 And I knew then that this market was probably in trouble.

00:19 The market was just too long in the 90s.

00:21 Speculators were buying on the news

00:23 and then they ended up selling on the fact,

00:25 which is generally what happens.

00:27 Often when you get violence in the Middle East

00:28 that causes a crude oil rally,

00:30 speculators are disappointed

00:31 because usually the supply disruptions

00:33 that the markets are pricing in don't materialize.

00:36 And then we get liquidation of that trade.

00:38 And so often the price of crude oil is often lower

00:42 at the end of the news cycle than it was in the beginning,

00:45 which is ironic because that's just,

00:48 from a fundamental standpoint,

00:50 that's probably not how most people would expect it to work,

00:52 but that's how it works more often than not.

00:54 The numbers we had coming into the last week or two

00:57 as support were 76, which we surpassed yesterday.

01:00 Our next number is about 72, 71.

01:03 I do think we see the low 70s.

01:05 So if you're bullish, maybe exercise a little patience.

01:09 We're getting a little bit of a technical bounce here

01:10 over the last couple of days,

01:12 but my best guess is that's not gonna last.

01:14 Seasonally crude oil generally trades lower

01:16 from mid-October through mid to late December.

01:19 So I'm not in any hurry to get bullish,

01:21 but I do think once we do get into the 70s,

01:23 it's probably a good value play.

01:26 - Absolutely, Brent said 81.10

01:28 as we're currently having this conversation.

01:30 We'll track it very closely.

01:31 (silence)

01:33 [BLANK_AUDIO]