PowerSwitch

Go to:

http://www.seasonalcharts.com/

and then click on oil chart on bottom centre/right.


Clearly shows that at this time of year we SHOULD be at the weakest - any value below 100 indicates weak prices, above is stronger. By Aug/Sept we could be seeing some eye watering prices on this basis.


I cant paste the chart directly if anyone can that would be good.

This one - yeah, interesting. So Sep/Oct has the most expensive oil and Feb/Mar the cheapest with approx 10% difference. What exactly is the chart showing though? Average price over the same day for each of 26 years? Corrected for inflation? What's the vertical scale?



EDIT: Okay after a second glance, the vertical scale is obviously percentage deviation from the start of the year - therefore I expect the graph has averaged 26 years worth of percentage deviations over a year. Inflation is irrelevant.

Suggesting that based on the current price of $67 we might expect a 9% rise to $73 by the end of Sept - we'll have to remember to check back here in 5 months.

Another point is that the graph ends 4% higher than it starts - an average 4% per year increase over 26 years which sounds about since that would suggest $20 oil in 1980. Well in reality oil was more like $30 in 1980 but spent pretty much the whole 15 years from 1985 to 2000 below $20.

I think you'd have to look at that chart over much shorter timescales than 26 years to see if the pattern had changed over time or was being skewed by a small number of extreme years. And does the December value of 104% include the cost of carry? I need to read the small print. If the interest rate is ignored then that does make the exercise somewhat meaningless, as a 4% increase over the year is very different when the interest rate is 1% versus 6%.

Having said that, the shape does look fairly reasonable, as Feb/Mar is US refinery maintenance time, lowering the demand for crude; May is the beginning of driving season when the market evaluates whether there is going to be enough gasoline for the summer; and the largest pressure comes during the autumn when refineries are running hardest to make heating oil for winter while hurricanes damage refineries and force the preference of light oil over heavy sour.

We do look at a lot of seasonal charts, especially for spreads between different years and crudes. Eg one might overlay the forward curve over the historic average for each month, thus showing where there's possible value in the forward curve.

I see they also have seasonal charts for prices (& futures prices) for crude oil, gasoline, heating oil, gas oil & natural gas. Shame we can't get them to overlay on each other I'd like to see how the gasoline or crude oil prices correlates with the S&P 500 or Nasdaq.

Allan