The oil canary and the collapse of crude prices

AROUND six weeks ago, the Texas port of Corpus Christi acted as a canary in a coal mine. This refers to a method used to warn miners of the build- up of dangerous gasses in the mine. The canary would die first, and so give the miners warning to evacuate. In this case, the Texas canary gave warning of the collapse of oil prices.

This particular canary was the oil tanker Anne, some six storeys high and capable of holding up to two million barrels of oil. It was the first time an oil tanker of this size had docked at an oil terminal on the US Gulf Coast. But, more importantly, the tanker was empty. Its task was to collect oil from the US and export it to other countries. This canary is symptomatic of the massive shift in the supply and demand equation for oil.

Over time our charts become cluttered with trend lines and other technical indicators. The problem is that these old lines tend to guide our thinking and analysis. It is very useful every now and then to clear these lines from the chart. The oil tanker Anne demands that we change our thinking and we need also to make this change in the analysis of the oil chart. We start with a chart showing just the candlesticks and no other information.