Monthly seasonality of oil

This article looks at the monthly seasonality in the price of crude oil (West Texas Intermediate, WTI).

From 1986

The following chart shows the average price change by month of WTI for the period 1986-2014. For example, since 1986 the price of WTI has increased on average 0.5% in January. 

Crude Oil (WTI) Monthly return average [1986-2014]

From the chart it can be seen that, historically, March, April and August have been strong months for WTI, while October and November have been weak.

Further, we can divide the year roughly into two parts:

  1. March-September when WTI is strong, and
  2. October- February when the WTI price has relatively been weak

The following chart plots the proportion of monthly returns that were positive over the same period. For example, since 1986 48% of the WTI price changes in January were positive.

Crude Oil (WTI) Monthly return positive [1986-2014]

The pattern here largely repeats that seen for the average returns: the strong months are March, April (with July also being strong), and the weak months are October and November.

From 2000

To assess the persistency of the behaviour, the following chart plots the average price change by month of WTI for the period 2000-2014 (i.e. this is similar to the first chart above, but the starting point is 2000 instead of 1986). . 

Crude Oil (WTI) Monthly return average [2000-2014]

Roughly, the two-part nature of the year can still be seen in the monthly performance: the WTI price is relatively strong March-August, but the now weak part of the year starts in September, through to December.

The big change in recent years can be seen in the strength of the WTI price in February: since year 2000 WTI has an average price change of +5.4%.

For completeness, the following chart plots the proportion of monthly returns that were positive over the same period.

Crude Oil (WTI) Monthly return positive [2000-2014]


 

Further articles on oil.

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