Monthly Seasonality & Brent

Brent crude oil appears to be relatively weak in the month of May, October, November and December

From the mid-1980s to September 2003, the inflation adjusted price of a barrel of crude oil on NYMEX was generally under $25/barrel. Then, during 2004, the price rose above $40, and then $50. A series of events led the price to exceed $60 by August 11, 2005, leading to a record-speed hike that reached $75 by the middle of 2006. Prices then dropped back to $60/barrel by the early part of 2007 before rising steeply again to $92/barrel by October 2007, and $99.29/barrel for December futures in New York on November 21, 2007.Throughout the first half of 2008, oil regularly reached record high prices. Prices on June 27, 2008, touched $141.71/barrel, for August delivery in the New York Mercantile Exchange, amid Libya‘s threat to cut output, and OPEC‘s president predicted prices may reach $170 by the Northern summer.The highest recorded price per barrel maximum of $147.02 was reached on July 11, 2008. After falling below $100 in the late summer of 2008, prices rose again in late September. On September 22, oil rose over $25 to $130 before settling again to $120.92, marking a record one-day gain of $16.37. Electronic crude oil trading was temporarily halted by NYMEX when the daily price rise limit of $10 was reached, but the limit was reset seconds later and trading resumed. By October 16, prices had fallen again to below $70, and on November 6 oil closed below $60.[10] Then in 2009, prices went slightly higher, although not to the extent of the 2005-2007 crisis, exceeding $100 in 2011 and most of 2012. Since late 2013 the oil price has fallen below the $100 mark, plummeting below the $50 mark one year later.

The 2003 invasion of Iraq marked a significant event for oil markets because Iraq contains a large amount of global oil reserves. The conflict coincided with an increase in global demand for petroleum, but it also reduced Iraq’s current oil production and has been blamed for increasing oil prices. However, oil company CEO Matthew Simmons emphasizes the peaking and decline of oil-exporting in Mexico, Indonesia and the United Kingdom is the reason for the price gouging. According to Simmons, isolated events, such as the Iraq war, affect short-term prices but do not determine a long-term trend. Simmons cites the use of enhanced oil recovery techniques in large fields such as Mexico’s Cantarell, which maintained production for a few years until it eventually declined. Pumping oil out of Iraq may reduce petroleum prices in the short term, but will be unable to perpetually lower the price. From Simmons’ point of view, the invasion of Iraq is associated with the start of long-term increase in oil prices, but it may mitigate the decline in oil production by retaining a partial amount of Iraq’s oil reserves. As a direct consequence, the oil production capacity was diminished to 2 million barrels (320,000 m3) per day. See Link

Brent_1988_GP.png

Monthly end price of brent crude (since 1988) is shown in the following table (except for Oct 2016 – the price is as of 17 Oct 16):

Monthly Crude_Table.png

Month-on-month percentage change in brent crude oil is shown below:

Monthly Crude_Table_Analysis.png

From the above table, the analysis shows the following key findings:

  • The month of May, October, November and December show (i) either or both average and median m-o-m change to be negative as well as probability of positive movement of less than or equal to 50 percent
  • February, March and April seem to suggest relatively stronger monthly positive movements, with average m-o-m movement as high as positive 3.8 percent and a probability of positive movement in excess of 60 percent

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Author: Ken Utau

Markets Observer + Food Lover

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