Seasonal Trading with Oil

Focus: COMMODITIES

Jeffrey Hirsch Image Jeffrey Hirsch Editor-in-Chief, The Stock Trader's Almanac and Almanac Investor

Seasonally speaking, crude oil tends to make significant price gains in the summer, as vacationers and the annual trek of students returning to college in August creates increased demand for unleaded gasoline, suggests seasonal trading expert Jeffrey Hirsch, editor of Stock Trader's Almanac.


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The market can also price in a premium for supply disruptions due to threats of hurricanes in the Gulf of Mexico.

However, towards mid-September, we often see a seasonal tendency for prices to peak out, as the driving and hurricane seasons begin to wind down. Crude oil’s seasonal decline is highlighted in yellow in the following chart.

chart

Shorting the February crude oil futures contract in mid-September and holding until on or about December 10 has produced 22 winning trades in the last 34 years.

This gives the trade a 64.7% success rate and theoretical total gains of $101,920 per futures contract. Following three consecutive years of losses, this trade has been successful in four of the last five years. 


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It has been over three years since crude last traded above $100 per barrel. Ample supply and inventories have largely keep price under $50 per barrel ever since.

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