The Periodic Table of Commodity Returns

U.S. Global Investors (Jan 27, 2016) - This table shows the ebb and flow of commodity prices over the past decade.

Is the Crude Oil Rally Doomed?

Frank Holmes - U.S. Global Investors (May 8, 2015) - This week, West Texas Intermediate (WTI) crude oil prices reached a 2015 high, rising above $60 before cooling to just below that. This marks the eighth straight week of gains. Investment banking advisory firm Evercore makes the case that the recent oil recovery is closely following the average trajectory of six previous cycles between 1986 and 2009. Although no one can predict the future with full certainty, this is indeed constructive for prices as well as the industry.

Because oil remains in oversupply, the recent rally owes a lot to currency moves. The U.S. dollar, which has weighed heavily on commodities for around nine months, declined to its lowest point since mid-January. We might be seeing a dollar reset, which should finally give oil—not to mention gold, copper and other important commodities—much-needed breathing room.

The oil rig count continued to drop in April and is now at a five-year low. According to Baker Hughes, 976 rigs were still operating at the end of the month, down 11 percent from 1,100 in March and 47 percent from 1,835 in April 2014. Eleven closed this week alone. This spectacular plunge has had the obvious effect of curbing output and helping oil begin its recovery from a low of $44 per barrel in January. Production appears to have peaked in mid-March at 9.42 million barrels per day and is now showing signs of rolling over. 

A price reversal historically has occurred between six and nine months following a drop in the rig count. The number of rigs operating peaked in October and oil started to bottom in January.

Baker Hughes Oil rig count plunges to the lowest level since October 2010

The Saudis sent the market into a freefall in November when they decided to defend their market share
instead of propping up prices, and they show no sign of changing course.

The U.S. has almost 500 million barrels of crude oil in storage. That's by far the most oil in storage since record-keeping began in 1982.
Supplies have grown because of surging domestic production and restrictions on most crude exports.

"Brent Crude Oil price has most likely bottomed out!"
thinks Tiho of The Short Side Of Long

A sideways consolidation into late June is now likely.
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