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WTI Crude Oil & Oil Stocks Seasonality & Year-End Outlook

October 31st, 2012 · Chris Vermeulen · 9 Comments

Crude oil has had some large price swings this year and another one may be on its way. This report shows the seasonality of crude oil along with where oil is trading and what the oil service stocks are telling us is likely to happen going into year end.

Since WTI Crude Oil topped out in September at the $100 resistance level (Century Number) many traders are looking for a bounce or bottom to form in the next week. Historical charts show that on average the price of oil falls during November and the first half of December.

The charts of oil and oil stocks shown below have formed patterns on both time frames (weekly & daily) that lower prices are to be expected. If you did not read my Gold Seasonality Report I just posted be sure to review it here: Gold Seasonal Report

Crude Seasonality

WTI Crude Oil Weekly Chart:

Here you can see that price tends to fall going into Christmas and rallies during the last week of trading. This price action falls in line with Dimitri Specks seasonal chart providing us with insight as to what we should expect. Later this week I will finish my report on the Election Cycle Seasonality report which shows weakness in the market during Oct & Nov when a president is up for re-election.

Crude Oil Price

Oil Services Stocks – Weekly Chart:

If you follow oil closely then you know likely know already that oil related stocks can lead the price of oil by a couple weeks. What this means is that if big money is flowing into oil stocks (bullish price patterns with strong volume), then you should expect the price of crude oil to rise in the coming days. That said, if money is flowing OUT of oils stocks then lower or sideways oil price should be expected.

The weekly chart oil stocks show a very large bearish head & shoulders pattern. While I do not think the neckline will be broken it is very possible.

One of the most important pieces of data on the chart is the VOLUME. Notice the lack of it… Volume tells us how much interest and power is behind chart patterns and declining volume clearly tells us these investments are out of favor currently and that big money is not moving into them.

Oil Stocks Weekly

Oil Services Stocks – DAILY Chart:

Zooming into the daily chart of the oil service stocks we can see there is yet another bearish pattern unfolding. Another head & shoulders pattern which looks as though it is just starting to breakdown as of this writing. Next support level is $35-36.

Crude Oil Stocks Daily

WTI Crude Oil and Oil Service Stocks Trading Conclusion:

Looking forward 1-2 months (November – December) taking the seasonal price swings in oil, re-election cycle seasonality and price action of oil stocks I feel oil will trade sideways or down from here. With that being said, expect crude oil to rally during the last week of the year. I hope this provides some useful info for your trading!

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9 responses so far ↓

  • 1 Not Fooled By Property Spruikers Hype // Nov 9, 2012 at 1:08 am

    Interesting Video

    US houses prices must fall another 50% ???

    Could he be right or just a US “Steve Keen” ?

    not too taxing to watch just the first 3 minutes.

  • 2 Matthew // Nov 10, 2012 at 3:51 pm

    I fail to see the relevance of 99% of your posts NF, this one is no different.

    Are you saying crudeoil price will see housing prices in Australia crash now?

  • 3 Greg Atkinson // Nov 10, 2012 at 8:58 pm

    Sorry I moved this comment by NF to here since the video clip seemed to be focused on the U.S. markets. It was originally posted in the Australian real estate discussion area but it didn’t really seem to be relevant to that topic.

  • 4 Lachlan // Nov 11, 2012 at 12:47 pm

    In regard to NF’s video.
    “Technically” either deflation or inflation is always possible. And Karl believes there are organic reasons (credit conditions) that demand deflation. Not sure if he completely disregards the possibility of general price inflation but it does sound that way. But currencies can be devalued even if legislation needs changing to do so.
    I only add that even if a currency is moderately devalued (without hyperinflating) then asset bubbles that have already proven popped (with the sentiment shift in the market changed) can only stay flat at best (for a while at least). My own general perception of sentiment from Australians though is that property will be flat for a good number of years. Maybe others detect something different. They don’t seem to think by and large that prices will collapse like in the USA. I understand it would not take much to change that but the system here has kept things propped more so than many of us expected.

  • 5 Not Fooled By Property Spruikers Hype // Nov 11, 2012 at 2:14 pm

    Hi Greg

    In the first 3 minutes Karl argues that US house prices are still overpriced & need to fall a further 50%. Karl looks at house pricing & debt against overall GDP & concludes that house prices need to fall 50% or GDP has to double. Take a look at Australian House prices / debt against GDP & then look at its historic comparison?? Alarm bells should be ringing. Just look at retail spending numbers declining. Yes some of the decline is down due to people saving & reducing debt, but a lot of it is due to the housing sector drawing disposable income – spending away from the retail sector so that people can pay inflated mortgages or rents

  • 6 Greg Atkinson // Nov 11, 2012 at 8:11 pm

    NF the big difference is that in Australia you can’t walk away from a home and hand the keys/loan back to the bank. So the foreclosure scenario discussed in the video clip is not applicable to the Australian property market.

    I do agree that debt levels are a worry but those levels can be eased back gradually without causing a property crash as such in my opinion.

  • 7 Not Fooled By Property Spruikers Hype // Nov 11, 2012 at 10:31 pm

    Sorry to talk property on this page Greg

    Only 12 States in US have non recourse loans all the others the same rules as here apply.

    Alaska, Arizona, California, Connecticut,Florida,Idaho,Minnesota
    North Carolina,North Dakota,Texas,Utah and Washington

    and in these states: California, Idaho, Nevada, New York, Utah banks can still apply to the courts to go after your other assets, so in reality only 7 states are non recourse.

    But more importantly there is no discernible difference in house price falls between full recourse states and non recourse states.
    Florida as a example has had the worst price falls yet they are non recourse.

    On another note look at Ireland for example same laws as us yet house prices imploded ??

  • 8 Matthew // Nov 12, 2012 at 10:27 pm

    No worries Greg, you need to find a place to file junk I guess. Page 4 of the Australian today had a couple of interesting articles on property. One titled “housing market gets a spring in it’s step”. Apparently the majority of surveyed people think it is a good time to buy property.

    Of 3 surveyed groups (owners, mortgagees and renters) only renters at 32% don’t think it is a good time to buy as a collective and just 9% of this group strongly disagree. Perhaps they are awaiting NotFooleds proclaimed but never coming 40% crash

    It really must be hard to wake up every morning hoping today will be worse than yesterday as NF does Greg.

    Old saying goes even a broken watch is right twice a day, I am not sure what this makes NF but I can’t see him being right on anything yet

    Frank and BP are my old fools on the balcony of The Muppets, NF is Beaker, rambling on a million miles an hour but no one can understand a word he is saying

  • 9 Greg Atkinson // Nov 13, 2012 at 8:08 am

    Now back onto the subject at hand. WTI is trading around $85 USD so it is operating within the range foretasted above at the moment. It will be interesting to see if it gets the December bounce this year.

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