Over the last year, the fundamental experts have changed the "rules" of the game regarding Crude Oil more often than a chameleon changes its color. Back in 2008, as prices rallied to never before seen heights, the usual suspects delegated black gold to official "Safe Haven" duty.
"Oil continues to gain momentum amid worries about the global economy," began one July 2008 news source. "It is a reflection of a commodity that will still have value if the rest of the financial world comes crumbling down around us." (Couriermail.com.au)
A much-anticipated "Oil Super Spike" to $300 per barrel, however, did not occur. Instead, prices took a flying leap DOWN from their mid-2008 peak in a gut-wrenching, seven-month sell off. Somewhere along the free fall, the experts renamed the game: Oil, once the VICTOR of recession, was now its greatest VICTIM.
By February 2009, Oil prices had plunged more than 70% to a five-year low. And, in the eyes of the majority, crude's bearish "coupling" with the global crisis was here to stay. On this, the following news items from the time say plenty:
- "Bad Economic News Batters Crude Oil." (LA Times)
- Following a report from the Organization of Petroleum Exporting Countries revealing a 46 million barrel surplus in oil stocks AND the highest January growth rate in inventories in 85 years: "Each barrel of oil that goes into storage in consumer countries weakens the cartels hold on the market and potentially prolongs the price skid." (Wall Street Journal)
- "Any belief that energy prices had bottomed were wiped away as crude plumbed new lows for the year and more government data suggested the economy may be worsening. The bull oil ear is officially over." (AP)
Yet again, the market defied mainstream expectations. From its mid-February bottom, Crude Oil has doubled in value in a powerful winning streak to six-month highs.
Right on cue, the powers-that-be revised their original "energy-and-economy-as-one" story. The newest version goes something like this: Despite the ongoing slump, energy demand is expected to rise.
GAME OVER.
As for clear and consistent insight into Crude Oil, the February 2009 Global Market Perspective foresaw the strong UPSIDE potential in prices weeks before they hit bottom. In that publication, our chief energy analyst presented the following close-up of and wrote: (Elliott Wave labels have been removed from the chart for this column)
"Our outlook for a bottom is -- naturally -- at odds with current bearish market fundamentals. But from a technical perspective, the typical bottoming sign of divergence still persists."