Where Does This Crude Oil Bear Market Rank?

Crude oil has been all over the news during the past week with rumors of a potential OPEC supply cut. Oil spiked up 12.3% on Friday, February 12, on this rumor, but hopes of a cut were unfounded. Instead, on Monday, an oil production freeze was announced by four oil-producing nations. This wasn’t the production cut that many wanted, but could it be enough to help oil reach some type of a low?

To answer this question, let’s put into context where the current oil bear market drop ranks in history. One way to measure the length of a bear market is how long an asset has been beneath its 200-day moving average. Incredibly, crude oil has been beneath its 200-day moving average for 390 straight days. Going back to 1983, this is the longest streak ever, with 280 straight days ending in April 1994 coming in second.

This Is the Longest Oil Bear Market by More Than 100 Days
021716_blog_figure_1

Source: LPL Research, FactSet 02/16/16
*Still active.

As of yesterday, crude oil was 80% off its all-time high of $145 per barrel set on July 3, 2008. This drop reached 81% last week, which was the furthest oil has been from its all-time high in more than 30 years (dating back to 1983).

Crude Has Never Been Further from Its All-Time High
021716_blog-figure_2

Source: LPL Research, FactSet 02/16/16

Crude oil is currently experiencing its longest bear market and is furthest off its all-time high in more than 30 years. We do believe there is potential opportunity around crude; however, it may not happen until there is a reduction in U.S. production to recalibrate supply and demand or Saudi production cuts.  Should either of those two events take place, given how decimated crude has been, this area could offer a nice opportunity.

IMPORTANT DISCLOSURES
Past performance is no guarantee of future results.

The economic forecasts set forth in the presentation may not develop as predicted.

The opinions voiced in this material are for general information only and are not intended to provide or be construed as providing specific investment advice or recommendations for any individual security. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

Commodity-linked investments may be more volatile and less liquid than the underlying instruments or measures, and their value may be affected by the performance of the overall commodities baskets as well as weather, geopolitical events, and regulatory developments.

Stock investing involves risk including loss of principal.

This research material has been prepared by LPL Financial LLC.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity.

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

Securities and Advisory services offered through LPL Financial LLC, a Registered Investment Advisor
Member FINRA/SIPC
Tracking # 1-469000 (Exp. 02/17)