Oil prices are likely to bottom out in the coming months, say analysts at McClellan Financial Publications.
The recent trends in gold prices, adjusted forward by 19.8 months, can be compared to prices, a shift that aims to highlight how gold price movements often feed into oil prices after that specific interval.
While not a flawless model, it generally provides high accuracy, the report said. Occasionally discrepancies arise, such as when the Russian invasion of Ukraine disrupted the oil market. However, after each such divergence, prices consistently strive to realign and return to their historical correlation.
“This model assumes we have a trough in mid-2024, followed by a rise toward the end of the year,” says The McClellan Market Report.
“That increase in oil prices will not be good news for federal politicians who may be running for re-election in November. And if the recent gold price rally (just to the right of this chart) continues to move higher, that will mean higher oil prices 19.8 months later,” it added.
In late 2023, crude oil prices fell earlier than expected, missing the predicted peak that gold price movements had indicated would occur later that year. However, oil prices have since returned to normal, the report points out.
The forecast indicates that the coming bottom will ideally occur around June or July 2024. That said, it’s worth noting that turning points may not follow this exact timeline and could occur slightly earlier or later.
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The key takeaway is that a bottom is expected, although more price declines could occur before that point is reached.
“As summer approaches, we should focus on other indicators to signal that the oil price bottom is approaching and/or that a rebound is beginning,” the report said.
