• 700 days Will The ECB Continue To Hike Rates?
  • 700 days Forbes: Aramco Remains Largest Company In The Middle East
  • 702 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 1,101 days Could Crypto Overtake Traditional Investment?
  • 1,106 days Americans Still Quitting Jobs At Record Pace
  • 1,108 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 1,111 days Is The Dollar Too Strong?
  • 1,112 days Big Tech Disappoints Investors on Earnings Calls
  • 1,112 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 1,114 days China Is Quietly Trying To Distance Itself From Russia
  • 1,114 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 1,118 days Crypto Investors Won Big In 2021
  • 1,119 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 1,119 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 1,122 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 1,122 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 1,125 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 1,126 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 1,126 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 1,128 days Are NFTs About To Take Over Gaming?
Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

Is The Bull Market On Its Last Legs?

Is The Bull Market On Its Last Legs?

This aging bull market may…

How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

  1. Home
  2. Markets
  3. Other

Crude Oil - Who to Believe?

This commentary was originally posted at TheChartStore on 4th April 2005:

In our July 21, 2004 Observations, we posted a series of inflation-adjusted crude oil charts and asked the rhetorical question: "Could the break out be for REAL?" Fast forward to March 31, 2005. The financial press was full of headlines and stories reporting that Goldman Sachs was suggesting that crude oil could SPIKE to $105 a barrel. Remember that date, March 31, 2005. Today, April 4, 2005, the financial press is reporting that a senior analyst at IFR Energy Services in New York believes oil prices could plummet to $28 a barrel as early as this summer. Who to believe??

Here is an updated chart of crude oil adjusted for inflation by the Consumer Price Index.

Chart 1 Notes:

  • At the risk of being repetitive, here is what we said last July: The "real" price of oil peaks in 1980 with a secondary peak in 1990. Whereas nominal price bottomed in early 1986 with a secondary bottom in 1998, the "real" price bottomed at the end of 1998 for our chart. We have added a simple downtrend line (in orange) to the chart to show the decline of "real" prices from 1980. The horizontal blue line demonstrates the top of the broad trading range of nominal prices.
  • Crude oil did indeed "break out," and we would suggest that our up-sloping orange trendlines form a channel of expected price movements.

On the following chart we have added two circles of the widely quoted price targets.

Charts 2 Notes

  • The target of $105 seems to us to be outlandish. Yes, commodity prices do spike up and down, and often in very short time periods. Without a major, negative news event, we feel a target of $105 should be summarily dismissed.
  • The target of $28 is slightly below our up-sloping orange tendlines. More reasonable. Until our trendlines are violated on either the upside or downside, we would prefer to use them as our guide of future price fluctuations.

Summary points:

  • The financial press has been reporting widely divergent forecasts for crude oil prices.
  • The Goldman Sachs forecast of $105 was reported on March 31, 2005. Hmmm, could it be that the old "mark 'em for the end of the month" trick is now being used for commodity markets?
  • Extreme forecasts rarely come true, but then, only time will give us the answers.

Back to homepage

Leave a comment

Leave a comment