Manic Market Monday would be a great way to describe how the day went yesterday. Crude has managed to rally 25% in just three days. This three-day rally is the strongest seen since Iraq’s invasion of Kuwait in 1990. The market is correcting itself today, however, with diesel and gas both coming off 11 cents this morning. Reuters reported that the “movements appear to be largely technical, but the extreme three-day rally may have sparked worries among market participants that prices are advancing rapidly without any significant changes in the market.”
On 2/27/15, front month heating oil traded at a high of $2.3514. On 8/26/15, front month heating oil traded at a low of $1.3745, for a decline of $.9769 in 6 months. Three days later on 8/31/15, front month heating oil traded at $1.6865, a $.3120 bounce or 32% rebound in 3 days.
The chart above shows the 25% jump from late last week into this morning, from mid $30’s to high $40.00’s. Crude has now dropped $3.50 today to recover from the surge. As stated, back in 1990 was the last time we witnessed a spike of this intensity.