It what seems like an annual event, oil prices are once again dominating the headlines and dominating the thoughts of the consumer. With West Texas Intermediate Crude trading up near the $110 level, consumers are considering ways to cut back on their oil and gas consumption.
Quite frankly, the chart looks an awful lot like the chart did last year when oil jumped from $85 a barrel in early February to eventually peak near the $115 level. This jump came after a consolidation period through December and January. The eventual peak came in late April/ early May.
This year we saw a similar consolidation in December and January and now we are looking at a jump in oil that has taken the price from the $95 level up above the $109 level as recently as Friday.
The price action isn’t the only thing that looks familiar either.
The recent trend in the Commitment of Traders (COT) reports shows that large speculators have been building a bigger bullish position in recent weeks and have now built the biggest net long position since last April.
The commercial hedgers have been building a more bearish position just as they did last year and it has reached its most bearish level since last spring as well.
While the trend for oil is still to the upside and the COT reports are looking similar, I would not necessarily start shorting oil just yet. I would recommend waiting for a reversal in the COT pattern and the price chart before committing to a bearish stance on oil.
© 2013 Moneynews. All rights reserved.