As kids and adults across the world don their costumes from pumpkins to presidents’ masks on this triduum encompassing the remembering of the dead, including saints (hallows), and all the faithful departed, I can’t help but think if there was ever a time the energy complex had come close to staring into the grim reaper’s eyes. Believe it or not, we have looked into the abyss only twice this past decade: The Great Recession which officially lasted from December of 2007 to June of 2009 and the Q3 2014 to Q1 2016 steep drop in oil prices. The Great Recession began with the bursting of an 8 trillion dollar housing bubble resulting in a U.S. GDP decline of almost 3% and an unemployment rate touching 10%. Roughly $16 trillion of net worth was lost leading to sharp cutbacks in consumer spending. WTI crude had collapsed from $147 a barrel to $32 a barrel. As for the 2014 drop in oil prices, contributing factors included large emerging economies such as China, Russia, India, and Brazil having rapid growth and expansion creating insatiable appetites for oil in the first decade of the new millennium began to slow after 2010, lowering their oil demand having significant price ramifications. All of these countries that pushed the price of oil all the way to those 2008 highs, had helped bring prices down by demanding a whole lot less of the light sweet crude. U.S. fracking and Canada’s oil sands were culprits as well during this time frame.
With that being said, the current energy complex is nowhere near, or at least, feels like it’s nowhere near the Spectre of Death’s door step. OPEC output has fallen by 80,000 bpd to 32.78 mmbpd, compliance by 11 nations with output targets is up 92%, Iraqi output has posted the largest drop of 120,000 bpd, and Asia’s imports are up 5.1% from a year earlier. Coupled with the Saudis and Russians voicing support to extend the agreement, it appears a bid in the markets is here to stay for now. As of 12:44pm EST, WTI for December delivery is up $0.07 at $54.22, HO is up $0.0042 at $1.8804, and RBOB is up $0.0137 at $1.7269. Upside today, in WTI crude, pushing and settling above yesterday’s high of $54.46 should signal a march towards the short-term channel-top of $55.03. Near-term support is the 12day exponential moving average at $52.69. Bullish tone continues, but we await the APIs tonight and the DOEs tomorrow for a better look into the supply and demand side of the energy sector. Until then, let us all reach into that bulk bag of candy and pick out that one piece that conjures up memories of all our Halloweens past and wait and see if this rally is a trick or a treat.