Has Oil Bottomed?


Since everyone is watching the great gas prices of January, disappear I thought I would put up a chart on oil futures. My wife noted that she paid 2.19/gal for gas in January while now it is at 3.29 here in Colfax, CA. The downswing in oil has brought the price of MLPs down to the point where they are now yielding close to 7% (ETP Energy Transfer Partners LP at 6.86%). However with this 50% increase in gasoline you would think oil was rising dramatically. In fact, the energy sector may have bottomed (jury is still out on that) but it certainly has not come roaring back. Today West Texas intermediate crude is under $50 per barrel. I am following the ETF Direxion Energy Bull 3x ERX, and after a bounce in the first half of February it appears to be headed south again, similar to the oil futures (chart here).

Quotes from an article on theStreet.com:

“Just by oil getting 20% off its low, they think the sun has come back out and the birds are singing and it’s a wonderful time to own oil,” Evans said. “Meanwhile, the statistics show oil production hit its highest level since the early 1970s — a 40-year high — and is 15% higher than a week ago.”

Crude oil inventories are the highest in 84 years, since 1931. The U.S. Dept. of Energy weekly inventory series dates from 1982, so analysts making that comparison are looking at an older, monthly data series from a different source, he noted.

Inventories of 444.4 million barrels are 80.6 million barrels, or 22.1% higher than a year ago and 89.5 million barrels, or 25.2%, above the five-year average level.

The first is a daily chart of ERX

Interactive Intraday Chart – Just enter the ERX symbol in the box below

Author: Geoff

Quick rundown: Grew up in Lombard, Illinois, went to Arizona State University, worked as a CPA with Arthur Andersen & Co, then Laventhal and Horwath, then Rolling Stones, then Heron International, then Goodby Berlin and Silverstein in San Francisco. Moved to the foothills in 1990 and traded futures and designed websites. Married to Kate Stewart, now living in Colfax, CA. We have six grandchildren. I enjoy camping in our RV, hiking, kayaking, fishing, droning and cross country skiing Also conga drumming, photography and dogs.