CNBC’s Jim Cramer said Tuesday that investors should prepare to buy oil next month, relying on chart analysis from Carly Garner.
“She thinks there could be one last drift from this week, possibly as early as December, and that drift could send crude oil prices down to $70, or even the mid-60s. Once we get there, she thinks this could be the mother of all buying opportunities.”
Related investment news
Midwest Texas Crude futures, the US benchmark for oil, have seen wide swings this week after the Wall Street Journal reported Monday that OPEC members are considering an increase of 500,000 barrels per day for the OPEC+ meeting in December. Saudi Arabia later denied the news. News of Covid-related deaths in China over the weekend also added to the volatility of Oil.
West Texas Intermediate crude futures settled at $80.95 a barrel on Tuesday.
To explain Garner’s analysis, Cramer first examines a chart of the seasonal pattern of WTI.
This graph shows how oil tends to behave at different points during the year and reveals that Thanksgiving week tends to be ugly for oil, according to Kramer. “Historically, some of the most devastating oil price drops occurred on or around Thanksgiving Day,” he said.
The chart shows that oil futures fell by $10 on the Friday after Thanksgiving in 2021. Crude oil fell 10% during the Thanksgiving week in 2018 and fell nearly 14% in 2014, he said.
Garner’s explanation for why Thanksgiving tends to cause such pain for oil is that the week includes the last trading day for December oil futures and that there is always an OPEC meeting in late November or early December.
“Keep in mind that holiday weeks are often very light in size, meaning that any moves tend to get disproportionately magnified because they don’t take [as] So much to move a commodity — or a stock frankly — through these lighter periods,” Cramer said.
For more analysis, see Kramer’s full explanation below.