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

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

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.

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