The History & Likelihood Of V-shaped Oil Recoveries

Adam Feik - Contributor - Energies

In recent days, crude oil and natural gas prices have continued to undulate within a range near their lows. What’s next for the commodities, and for the energy companies whose fortunes are joined at the hip of oil and gas?

With producers like Shell, Occidental Petroleum, BP, and ConocoPhillips announcing big-dollar capital spending cuts, will oil’s chart soon be tracing a V-shape?

Will history rhyme?

Phil Flynn presented the following analysis in his article for Futures Magazine yesterday:

“In 12 data points when oil had a break of 40% or more within a year the market rallied back 52.8% within 12 months. Even when the break was only 30% with 20 times the rebound was still a very impressive 45.5% within 12 months. This snap back comes usually as the market realizes that a period of low prices will stimulate demand and cut backs in production will take their toll.”

Richard Hirayama, portfolio manager for WHV Investments, provided a similar perspective – based on calendar years – in his portfolio manager letter this month. Hirayama furnished this nugget: Continue reading "The History & Likelihood Of V-shaped Oil Recoveries"