This is a “quick hit” post – too long for a tweet, but not a complete blog post either. Maybe I will call these quickits.
Anyway, I caught a snippet on CNBC this morning discussing the plunge in oil prices. The on-air personality recounted a conversation she had with an oil analyst. The oil analyst assured her that people should not panic because the current drop has not yet reached the depths of the financial crisis.
Oil is in the $80s now. During the financial crisis, oil went from $140 to $33. (Hard to fathom now, right??!). So, the reassurance is that oil has not yet gone into the $30s and that the time to panic will only come at some lower price. My view is this: by the time oil gets to the $30s, the time to panic has long gone. At the same, there can be no reassurance in prices just because they have yet to reach some rock-bottom, panic level. If oil does manage to crash again, we should be thinking about buying, not panicking.
I am not sure what oil price is the right panic level, but I am pretty sure that panic never helped anyone succeed.
Source: FreeStockCharts.com
Note that the International Energy Agency is already “panicking” about oil prices. From Reuters today in “IEA sees 2015 oil demand growth much lower, supply hitting prices“:
“Demand for oil in 2015 will grow far slower than previously forecast as global economies remain weak, the International Energy Agency said on Tuesday, and prices may extend their sharp fall so long as OPEC shows no sign of countering a supply surge…
…Global oil supply rose by almost 910,000 bpd in September to 93.8 million bpd, almost 2.8 million bpd higher than the previous year.
In a rare IEA comment on OPEC’s strategy, its chief analyst Antoine Halff said the producer group may no longer be willing or able to adjust production as the market has been transformed by the U.S. shale oil revolution.”
Be careful out there!
Full disclosure: no positions
I won’t comment on the price of oil as I haven’t looked at the charts in a few days, but your point is excellent. The time to panic, if panicking is ever good, is not after a market has already made a monstrous move. Clues to get out occur well before mainstream panic sets in. Crude broke a rising trendline in July. It made a significantly lower high and then lower low following this. It moved into a choppy consolidation in September, and then broke to the downside in October. All signals that said get out…well before the current dive into the low 80’s.
Agreed!