There may still be hope for Oil bulls

It's been a brutal few weeks for energy bulls, myself included. But there may be some light at the end of the tunnel.

It’s been tough being an oil bull lately, it has so many fundamental reasons to head higher, yet here we are Oil has had 5 red weekly candles in a row, and lots of people are throwing in the towel on the energy trade.

The last time we had this many red weeks in a row was in November of 2021, which is actually very interesting when you take a look at the chart below which illustrates the seasonality of crude oil. It gives me some hope that a bottom is very close to being in.

This chart is based off of data from the last 20 years, as you can see November is by far the worst month for Oil thankfully we are almost through it, what gives me some optimism is that December to March looks really good based on this chart.

In November of 2021, we went from $85 all the way down to $62 in the month, when the month was over prices had bottomed and Oil started it’s incline moving to a peak of $130 in March of 2022, around the time when Russia had invaded Ukraine.

In November of 2022, we went from $95 down to $75 in the month, November also marked a bottom here as Oil prices basically flatlined into March and the bleeding stopped.

Another important thing that has happened in the recent carnage is that oil futures net long positions have fallen to the very bottom of their historical band, and many have exited the trade. A reset if you will. Which is very bullish moving forward.

We are at positioning levels near some pretty rough times for Oil historically, the Covid lows, The end of 2018 and the end of 2015. When you get to these kind of bottoms, you can get a slingshot effect the other way, which has happened historically and based on fundamental catalysts is very possible.

The chart below is very telling of the current sentiment in the market, the masses are buying puts on Brent oil at record levels, from my experience usually when this type of action occurs, the pendulum swings the other way.

Another thing to consider is the inverse relationship between the $DXY and Crude Oil, when the dollar is weakening this is usually very bullish for oil prices. This is a weekly chart of the $DXY, technically the dollar is currently breaking down, recent moves in Gold and Silver are indications that the precious metals are starting to sense what’s coming. The $DXY had a great run in 2022 when the fed raised rates aggressively and faster than other countries. This catalyst is now likely out of the way.

In summary, I remain extremely bullish on oil in the medium to long term, based on supply issues, growing demand, and a green energy transition that just isn’t going to be feasible anytime soon in my opinion. I continue to hold my oil positions which are currently Transocean and Valeura Energy, the latter which has still performed great through this rough patch.

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