Crude Oil versus Stock Prices

Drops in crude oil have an impact on stocks in a positive way.

The important point to remember is that falling crude oil prices have a lagged effect on the overall equity market. How long is that lag? It changes over time but it is approximately 6 months.

When oil prices rise, it too has a lagged effect on the market by a variable amount of time. Of course, it depends on many factors, regulatory and global risks constantly change. I am not covering the risk of rising oil price with this chart, only reinforcing the positive impacts of falling oil prices.

Oil prices are the most-watched price since we see them on gas station signs everywhere we drive and yet it doesn't have instant impact on the economy.

Look at the history of the price of crude oil and the price of stocks. They are related as you can see when I plot the large drops in crude and the price level of stocks when that drop occurred.

Tim 9/18/2023 10:19AM EST

Comment:

If you refer to the previous time I posted this analysis, you can see how the 1986 crash in the price of crude oil is similar to the current timeframe using the 2008 peak in crude oil as a comparison. This overlay is the bright blue line on the chart and seems to be a long term reaction to a massive drop in the price of crude which has repeated, as you can see. It implies more sideways price action going forward. The world seems to be upset by the current hike in prices back above $90/barrel and by the failure of the administration to refill the SPR (Strategic Petroleum Reserve) in the US on the recent drop under $65/barrel.
9/19/2023 9:53AM EST