Remember last month when that Saudi oil refinery got attacked by drones and what looked like rockets? The attack made the news and dominated the news cycle for three days. The attack also happened on a weekend so the oil market had a giant gap up on that Monday for one of the biggest opening gains seen in decades for the price of crude oil.
But look at where oil is now.
The price of oil not only has given up all those gap up gains, but now is even below its lowest price of September.
Global demand for oil is shrinking, because the global economy is soft. Not even heightened risks in transportation could stop the underlying price trend that soft demand has created in the oil market.
This also shows you though how news events rarely have a meaningful impact on a market a week later. It’s the long-term trends that matter and oil has been weak now for over a year starting when the yield curve for global bonds (exluding the US) inverted in the summer of 2018.
Remember stick to the trends to keep your eyes on what is important instead of the news headlines and daily gyrations when it comes to trading and investing as they tend to be noise when it comes to the big trends of a market.
In fact those that shorted oil futures on that gap up or on the next day are the ones that are making money and not those that bought the news on that Monday open in the oil market. Oil prices and energy stocks remain in a deep bear market. I want to buy and invest in that space one day as it pays big dividends, but that moment is not here yet. I am being patient for it as it will be a huge opportunity when the right time comes.
-Mike
