February is the best month to invest in oil.
WTI Crude, the U.S. benchmark, has declined 5 percent so far this month to $61.45 a barrel. That's rare. Only twice in the last 14 years has the crude given negative returns in the second month of the year. Even the Relative Strength Index, a technical indicator, shows oil rebounded from near oversold levels.
The current plunge is largely attributed to the turmoil in financial market since Feb. 2, Vandana Hari, founder of Vanda Insights, said in an emailed statement to BloombergQuint. “Crude is also caught in a tug-of-war between OPEC's reassurance on supply cuts and fears of the U.S. share resurgence.”
Seasonality plays its part too in driving prices upwards into the summer in the northern hemisphere. Demand picks up as the U.S. enters summer holidays, said David Lennox, resource analyst at Sydney-based researcher and brokerage Fat Prophets.
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Both the experts said inventory dynamics don't have much impact on seasonal pricing.
Technical Indicator Signals Rebound
The Relative Strength Index shows that oil was near 30, which is the oversold mark. Every time the indicator fell below that level in the last six months, the oil rallied 12-20 percent.
Lennox has a year-end target for WTI at $70-80 a barrel and Brent at $74-84.
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