rounded corner
rounded corner
top border

On Verge of a Monthly Breakout. The Energy Report 12/05/17

Bookmark and Share

Back in December of 2015, I wrote that the spike down to $26 a barrel for oil was a generational bottom and a point that we would look back at and wonder why we did not buy oil when it was that cheap. Of course, at that time it was hard to see that there were calls for $10 a barrel crude and noted analysts that said that oil might not ever trade above $40 a barrel again. That negativity gained some popularity when the U.S. stock market had its worst start in history. In January and February of 2016 we double bottomed at $26 a barrel.

Of course, now looking back at those predictions they look ridiculous now. The long-term commodity cycle really overshadows the doom and gloom of the moment. The thought that somehow the oil glut would always be with us. That this time was different as shale oil producers would continue to produce oil no matter how much money they were losing. Or that cap x cuts that back in 2015 had, at that point, according to Tudor, Pickering & Holt, say 150 oil projects that have been delayed, resulting in an estimated 13 million barrels a day of oil production deferred indefinitely. That was equal to 15% of total global output back in late 2015. That number rose as negativity added to more cuts and loss of future oil production cuts.

I pointed out that oil, back in early 2016, was almost a carbon copy of the double bottom we had in oil back in 1999. I pointed out that in 2015 oil put in its second back to back losing years since 1997 and 1998. The following year of 1999 it gave a historic comeback and cemented a bottom in oil prices for a generation. After falling over 30% in 1997 and 1998, in 1999 the oil market rebounded almost 107%.  In 2016 oil also had a big comeback and hit a high of 5524.

Oil struggled a bit in 2017 early on fake news. Doubts about the success of OPEC production cuts and incorrect predictions and overestimations of U.S. shale oil production. The other factor that held back oil were predictions of lackluster demand that has missed the point that sometimes low prices fuel more oil demand, not to mention inspire economic growth.

Yet now as oil consolidates, and everyone is looking for a correction as record speculative open interest has amassed in the crude complex one must wonder what a potential breakout on the monthly chart could do to the price of oil next year. As I wrote in December of 2015, the comparisons to what happened in the late 1990’s and what is happening now are almost uncanny.

Energy companies were bleeding cash and it set off merger mania as energy companies, big and small, had to do whatever it took to stay alive. In 1999 Exxon Corp. and Mobil Corp. agreed to an $82 billion merger that created the world’s largest publicly traded oil company which sounds kind of cheap currently. Not long after in 2001, Chevron Corp. and Texaco Inc. merged to create the world’s fourth-largest investor-owned oil company, known as ChevronTexaco for a mere $45 billion dollars.

I suggested that the speculative blow-off was 1998/99 all over again.  In 2015 it was China fears. In 2015 it was also the Asian financial crisis. Back in 1999 we had people tell us that oil would never trade above $30. Now we had people tell us oil would never trade above $40. In 1999 and 2015 we saw a recovery that was interrupted by a crisis in emerging Markets. The crisis caused a 33% drop in the Nasdaq between July-Oct 1998, when Long Term Capital Management went bust.  The Fed panicked, and monetary policy was eased setting the stage for a surge in stocks and oil demand here and in China. 1998/99, one which ultimately took valuations & interest rates sharply higher.

Back in 2015 the Fed slowed its normalization of economic policy due to the uncertainty. And now the stock market is setting record highs. History repeats itself. When you are living history its hard because of the day-to-day noise. But if you look at the monthly chart, despite record longs the risks are to the upside in this new bull oil run.. Nat gas failed as the market prepares for an injection of 3 bcfs into supply and doubts about the cold weather forecast. Yet, while gas is struggling in price here, look at China Reuters reports that china’s push to use more natural gas over winter in a bid to cut air pollution is running into the harsh realities of rising prices and limited supplies of the cleaner fuel.

In a signal of what may become more government intervention in the natural gas market, China’s state planner ordered eight regions to meet with natural gas producers, liquefied natural gas (LNG) to terminal operators and traders.

The meetings are effectively a warning by the National Development and Reform Commission (NDRC) to the various players in the natural gas sector to ensure that prices don’t rise too much even as rising demand causes supply shortages.

Beijing has encouraged China’s provinces to switch from coal to natural gas for both residential heating and industrial processes over winter as part of efforts to limit the smog that has in past years choked cities, including the capital.

In some ways, the move has been too successful, with the industry-heavy provinces of Hebei and Shandong warning of natural gas shortages, and Hebei forcing.
Phil Flynn
Questions? Ask Phil Flynn today at 312-264-4364

View The Energy Report

A Subsidiary of Price Holdings, Inc. – an Employee Owned Diversified Financial Services Firm. Member NIBA, NFA

Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.

The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2017

It is time to tune into the Fox Business Network where you get the Power to Prosper! I am going to be speaking at MoneyShow Orlando in early February.  Get signed up early as rooms are filling up fast! Go to



Recent articles from this author

About the author

Mr. Flynn is one of the world's leading energy market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.

Phil Flynn's accurate and timely forecasts have come to be in great demand by industry and media worldwide. His impressive career goes back almost three decades, gaining attention with his market calls as writer of “The Energy Report”.

He is a daily contributor to Fox Business Network where he provides daily market updates and analysis. Phil’s daily commentary is also featured in Futures Magazine, International Business Times, Inside Futures, 312 Energy, Enercast, among many others.

Phil is a lifelong resident of Illinois. He attended Daley College in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange which eventually led him and his team to The PRICE Futures Group.

Media highlights include: The President of the United States, Bloomberg, ABC, CBS, NBC´s "Today Show" and "Nightly News with Tom Brokaw", CNBC, CNN/CNNfn, FOX´s "O´Reilly Factor", PBS´s "The Newshour with Jim Lehrer" and "Nightly Business Report", MSNBC´s "The News with Brian Williams", The Wall Street Journal, Business Week, Investor´s Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, Inside Futures, and National Public Radio.

Contact Phil Flynn: (800) 769-7021 or at

Published by Barchart
Home  •  Charts & Quotes  •  Commentary  •  Authors  •  Education  •  Broker Search  •  Trading Tools  •  Help  •  Contact  •  Advertise With Us  •  Commodities
Markets: Currencies  •   Energies  •   Financials  •   Grains  •   Indices  •   Meats  •   Metals  •   Softs

The information contained on is believed to be accurate but is not guaranteed. Market data is furnished on an exchange delayed basis by Data transmission or omissions shall not be made the basis for any claim, demand or cause for action. No information on the site, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any futures or options contracts. is not a broker, nor does it have an affiliation with any broker.

Copyright ©2005-2019, a product. All rights reserved.

About Us  •   Sitemap  •   Terms of Use  •   Privacy Policy