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PETER BRIMELOW
Why oil prices will bounce back
Commentary: OI's King predicts declining output will tighten world market
By Peter Brimelow, MarketWatch
Last update: 10:14 p.m. EST Nov. 30, 2008
NEW YORK (MarketWatch) -- A successful but still-scarred oil bull hints oil will bounce ... eventually.
In our late-summer article charting the inflation-adjusted price of oil since 1861, Edwin S. Rubenstein and I asked: "Is oil headed for a fall?"
We pointed out that oil had declined sharply for nearly 20 years after its 1980 spike. But its more recent spike (oil reached $145 a barrel, remember?) had taken it to unprecedented highs.
We were asking a good question, as it turned out. (Blind luck, of course). The January Nymex contract for light, sweet crude was $54.43 on Friday, up from its lows although breaking badly at the close.
Is oil beginning a bounce? It's much closer to its historic range. And the MarketVane service's Bullish Consensus for Crude Oil was recently down to 22%, its lowest point since 2002, when oil made a major bottom just under $20.
I checked in with one of the most successful oil bulls, Outstanding Investments. Editor Byron W. King believes energy is in a long-term supply crunch. But he was quick to recognize that oil prices had sustained a significant reversal this summer. He wrote: "Oil tested the $150 mark. But like Pickett at Gettysburg, this charge to $150 failed." See July 24 column
Wasn't enough. Over the past 12 months, OI is now down negative 52.62% by Hulbert Financial Digest count.
Of course, that's devastating. But remember there's a lot of devastation to go around. The dividend-reinvested Dow Jones Wilshire 5000 is down negative 36.31% over the same period.
And OI does have a strong long-term record. Over the past three years, the letter has achieved an annualized gain of 1.79%, which looks good compared to the negative 5.31% annualized loss for the total return DJ-Wilshire 5000. Over the past five years, the letter has achieved an annualized gain of 15.73%, vs. 0.78% annualized for the total return DJ-W 5000.
King doesn't exactly call an oil bounce. But he sure implies it: "I've been getting a lot of calls and emails from people asking about the falling prices for oil in recent weeks. The immediate explanation is that world economic activity is decelerating. Demand is falling. OPEC announced cuts in output. But the markets still believe that economic decline will trump the ability of OPEC to prop up the price of oil. Enjoy it while it lasts." [more]
http://www.marketwatch.com/news/sto...x?guid={5B395193-9C4E-469F-A783-39394EC4C180}
Why oil prices will bounce back
Commentary: OI's King predicts declining output will tighten world market
By Peter Brimelow, MarketWatch
Last update: 10:14 p.m. EST Nov. 30, 2008
NEW YORK (MarketWatch) -- A successful but still-scarred oil bull hints oil will bounce ... eventually.
In our late-summer article charting the inflation-adjusted price of oil since 1861, Edwin S. Rubenstein and I asked: "Is oil headed for a fall?"
We pointed out that oil had declined sharply for nearly 20 years after its 1980 spike. But its more recent spike (oil reached $145 a barrel, remember?) had taken it to unprecedented highs.
We were asking a good question, as it turned out. (Blind luck, of course). The January Nymex contract for light, sweet crude was $54.43 on Friday, up from its lows although breaking badly at the close.
Is oil beginning a bounce? It's much closer to its historic range. And the MarketVane service's Bullish Consensus for Crude Oil was recently down to 22%, its lowest point since 2002, when oil made a major bottom just under $20.
I checked in with one of the most successful oil bulls, Outstanding Investments. Editor Byron W. King believes energy is in a long-term supply crunch. But he was quick to recognize that oil prices had sustained a significant reversal this summer. He wrote: "Oil tested the $150 mark. But like Pickett at Gettysburg, this charge to $150 failed." See July 24 column
Wasn't enough. Over the past 12 months, OI is now down negative 52.62% by Hulbert Financial Digest count.
Of course, that's devastating. But remember there's a lot of devastation to go around. The dividend-reinvested Dow Jones Wilshire 5000 is down negative 36.31% over the same period.
And OI does have a strong long-term record. Over the past three years, the letter has achieved an annualized gain of 1.79%, which looks good compared to the negative 5.31% annualized loss for the total return DJ-Wilshire 5000. Over the past five years, the letter has achieved an annualized gain of 15.73%, vs. 0.78% annualized for the total return DJ-W 5000.
King doesn't exactly call an oil bounce. But he sure implies it: "I've been getting a lot of calls and emails from people asking about the falling prices for oil in recent weeks. The immediate explanation is that world economic activity is decelerating. Demand is falling. OPEC announced cuts in output. But the markets still believe that economic decline will trump the ability of OPEC to prop up the price of oil. Enjoy it while it lasts." [more]
http://www.marketwatch.com/news/sto...x?guid={5B395193-9C4E-469F-A783-39394EC4C180}
..Are we talking Wisconsin Cheese?
