A Little Perspective on the Oil Market
Jun 20th, 2008 | By Brian Hunt | Category: Oil Investment & Alternative EnergyIt’s hard to believe now, but crude oil was under $20 a barrel back in 2002. The U.S. economy was weak, and Chinese demand hadn’t entered overdrive yet.
Since then, the bull market in oil has behaved like every other one since the beginning of time: Run higher, then correct. Run higher, then correct. Occasionally, run way higher, then correct.
As you can see from today’s chart, oil ran all the way from $55 to $135 in the past 18 months – a 145% run for those of you scoring at home.
Moves like this almost always precede sharp corrections. The market doesn’t “like” to carry a lot of people onto easy money for long. You can see how a decline down to $105 would be totally reasonable in the context of the rally. Even a decline down to $70 would leave oil in the realm of its long-term trend.
So… for the oil investors out there: Expect a decline. A $40 haircut isn’t unreasonable in this wild market. But chances are, it would be a healthy correction in the midst of a long-term bull market. 
Source: A Little Perspective on the Oil Market
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