While natural gas prices keep climbing, the other major energy fuel – crude oil – remains suppressed.
Crude’s 3-year chart below highlights this bear trend clearly. Since 2024, each reaction high was marginally lower than the one before. And each lower low dipped deeper south. Over time, a definitive “downtrend channel” is formed. To any casual reader, this is a stark bearish pattern.
So gloomy is the crude outlook that Saad Rahim, chief economist of one of the world’s largest commodity trading firms, Trafigura, predicted this week that an oil ‘super glut’ is coming.
The reason is due to a wave of supply growth about to hit the market. These growth are emanating coming from long-term capital projects which, despite the $60 price level, have to go on-line. “There is no getting away from a glut or a super glut,” he stressed.[1]
Astute macro traders are probably shorting the commodity on every rally. Note, for example, the brevity of each rally.
With no support until $50, early 2026 may see a quick test of that floor.
If crude’s projection is down, should we abandon oil stocks? Now that’s a different matter.
US equity market is currently on a roll. Key stock indices, Nasdaq in particular, are registering new all-time highs almost on a monthly basis.
This bullish equity market sentiment may sustain the valuation of oil stocks longer than expected. iShares Energy (ticker: XLE) has been trading sideways for two years despite falling crude prices.
Therefore I wouldn’t rush out of the sector yet, although stops are recommended.
