At the beginning of the year 2016, you could purchase a barrel of oil for about $26. Today that same barrel of oil would cost you $69. If your first thought is "that's more than a double," your first thought is on the right track. But to be completely accurate and on the money, that's an increase in price of -- could this be correct? -- 165%.
I keep double checking that percentage gain to see if perhaps I've made some kind of idiotic mistake, but it seems to be the right figure. We're not even at the two-year mark yet, so the gain is at least a semi-remarkable move even in the world of volatile commodities.
Here's a chart of the weekly high, low and closing price for a barrel of West Texas Intermediate Crude:
To help make the price trend clear and unmistakable, I have provided a trend line on the chart that connects the 2016 low with the slight dip in the summer of 2017. You can see how the price has managed to stay above that line and remain in an uptrend even to this day. The demand is outweighing the supply is the way some economists used to phrase it.
To compare to a similar but slightly different commodity chart, take a look at the natural gas price movement over the weekly time frame:
It's higher -- I think you could even say "much higher," I mean, 1.66 to 2.77 is not a double but would count as a serious gain-- but it's nothing like the gain in oil over the same period.
For a more complete perspective, here's the monthly chart for the price of oil which takes us all the way back to the year 2002:
So, it's clear that the price of oil -- although it's been rallying for weeks now -- remains well below that 2008 peak up near 150/barrel. What's interesting about this chart, though, is the attempt to break above the down-trending Ichimoku cloud and to remain there.
Right now, it's managed to price itself above the cloud for 5 straight months. The next significant level to close above would be that down-trending line that connects the major 2008 high with the 2013 and 2014 peaks. I think it could be said that we're about halfway back to the 150 top, coming off the 2016 lows.
How have oil stocks done during the same period? Well, they've rallied but it's been nothing as dramatic as the move in the price of oil itself. Here's the weekly chart for the Standard & Poor's Oil and Gas Exploration ETF, a proxy for stocks in the industry:
So related stocks have had a nice move -- 22 to 41, almost but not quite a double -- but nothing like the 165% blast in the underlying stuff.
What amazes me, though, is the ability of the rest of the stock market to continue to blast upward even as oil costs more and more. A friend of mine who talks to actual economists tells me that it's the new tax laws having more of an effect than higher costs for an essential commodity.
It still seems odd to me, though. Especially at a time when interest rates continue to march higher as well...but that's another story.
I do not hold positions in these investments. No recommendations are made one way or the other. If you're an investor, you'd want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.
