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Martin Tillier

Martin Tillier

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How To Play A Recovery In Oil Prices?

“Feel” is a concept that, in analysis at least, doesn’t get the respect it deserves. We are all supposed to have only logical, analytical reasons for believing something is about to happen, but if the last few weeks has told us anything it is that when markets get the bit between their teeth, logic is the first casualty. U.S. stocks dropped over ten percent from their highs on fears that the Fed may make a miscalculation and that growth may be a bit slower than previously anticipated. For comparison, by the time the same thing had happened in 2008, it was clear that the financial system was in trouble and we were heading to an actual recession. Oil has fared even worse, dropping over twenty percent on the same growth fears, price driven supply increase in the U.S., and exceptions to the Iran sanctions. In both cases, the move has gone way beyond logic, so I make no apologies for saying that this morning, it feels like things are finally changing.

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Figure 1: S&P 5 Day Chart

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Figure 2: WTI Futures since 08/01/2018

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Figure 3: Dollar Index 3 Month Chart

The stock market (figure 1) has reversed recent trends in price action, dropping early and recovering strongly as the day progresses rather than giving up early gains collapsing during market hours. The dollar (figure 3), after flying high in its role as a safe-haven, is losing ground, and even…


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