Editor's Note: Kent's paid-up Energy Advantage subscribers got his complete energy forecast, including renewables and LNG last week. We wanted to share his oil targets with you because, while energy is looking very bullish overall, crude promises some aggressive upside potential…
The final quarter of 2018 has certainly been "historic." Then again, so was RMS Titanic's last night above water.
Both primary crude benchmarks posted highs on Oct. 3, but through close of trade on Dec. 27, they've been in marked retreat. West Texas Intermediate (WTI), the standard for futures contracts set in New York, has lost 41.6%, while Brent, the more widely used global yardstick set daily in London, has shed 39.8%.
Those figures even include a major single-session advance of 8% recorded on Dec. 26.
Of course, oil has been moving in tandem with a collapsing broader stock market. Weakness and volatility have been boosted by (largely misplaced) angst involving a credit inversion, where shorter-term maturities begin offering higher yields than paper further down on the curve.
A yield inversion is sometimes regarded as a precursor to a recession, although I also regard this fear as quite overblown.
Why? It's simple: The market has had more inversions not leading to recessions than it has had those resulting in one. Besides, in the unlikely event a recession hits this time around, it usually takes at least 18 months for any tangible indicators to form. Prior to that, it's all idle speculation, guesswork, and worry.
And as if to put a point on it, that worrisome inversion has quietly corrected over the past few weeks.
At the end of each year, there is a combination of loss-taking for tax purposes, institutional investors balancing and re-balancing portfolios, and lowered liquidity.
This is nothing new. This year, however, all three factors have collided in a profoundly uncertain environment fueled by a government shutdown, geopolitical tensions, concerns over U.S. foreign policy consistency, a U.S.-Chinese trade war, and highly suspicious computer-buying programs.
So it's easy to see why crude prices seem stuck in the basement – stock prices, too, for that matter.
But as I'm about to show you, the year ahead looks much brighter than the current situation suggests…
About the Author
Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle.