This Chart Can Help You Time When to Buy Key Oil Names

Little is certain in the energy investing space, but investors can count on one thing: oil prices show seasonal patterns. Using a seasonal chart, investors can time when to buy high-quality names such as Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) to best position themselves for upside.

| More on:
The Motley Fool

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Perhaps one of the only things oil investors can count on each year is that oil prices exhibit seasonality; that is to say, certain time periods throughout the year show recurring patterns in price (some periods show seasonal strength, and others show seasonal weakness). These patterns aren’t definite. Equityclock.com, for example, shows that crude oil typically has a fairly weak October, showing positive gains only 40% of the time.

What is the seasonal pattern for oil? As shown in the chart below, oil is typically weakest from August through February (a pattern that shows on both the five-, 10-, and 15-year charts), and then strongest from February through to the end of July. Oil has actually tracked this pattern fairly well this year.

The seasonality in oil prices is mostly due to demand from refineries, which goes in seasonal cycles. Typically, demand from refineries peaks in July, which coincides with the summer driving season. As the summer driving season winds down into August and September, gasoline demand falls, and, as a result, refiners use this period to engage in shutdowns for maintenance. The end result is that between July and October each year, demand for oil typically drops 1.2 million barrels per day (the five-year average for this period).

This leads to a predictable slump in oil prices. The end result is that investors should typically consider using the fall as a period to accumulate oil names. Of course, there are numerous other factors other than seasonal refinery demand that influences oil prices, and this year these factors seem more likely to amplify the normal seasonal downturn in prices, giving investors an even better buying window.

 

Image source: David Stendahl from Signal Trading Group
Image source: David Stendahl from Signal Trading Group

The outlook for oil this fall is bearish

There are a few factors at play, and the first is inventory levels. As of the EIA’s last weekly report (Sept. 8) , there were 511 million barrels of crude oil in storage. These are concerning levels; they are 53.4 million barrels higher than they were a year ago and about 130 million barrels above the five-year average of 380 million barrels.

Even more concerning is that this year oil inventories managed to increase from mid-July to mid-August during a period when inventories almost always seasonally drop due to strong demand from refineries.

According to Art Berman, no real recovery in oil prices is possible until oil inventories come down by at least 125 million barrels to something approaching the five-year average. This is because the main issue in the oil market is no longer oversupply (oversupply for the past few months has only been about 500,000 bpd, which is fairly normal).

Refinery maintenance season is just starting and set to rise through September and October, taking hundreds of thousands of barrels of demand out, which should lead to builds in inventories rather than declines. This should keep a lid on oil prices and possibly lead to even more downside, at least until refinery maintenance season winds down in late October.

Adding to this downside is the fact that the upcoming OPEC meeting is unlikely to lead to any sort of freeze since Iran wants to restore its production to levels it had before sanctions.

Crescent Point is setting up for a strong buying opportunity

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) is a market leader in terms of assets (it has some of the shortest payback assets in North America), technology (it has been using waterflooding to continually drive down decline rates of its wells and reduce capital expenditures), and free cash flow. Further weakness in oil could lead to a buying opportunity.

Crescent Point shares just plunged to the low $17-per-share range (on news that they are issuing equity to grow production as well as due to the recent weakness in oil prices). Oil analyst Eric Nuttall recently stated that if Crescent Point got down to the high $18 range or low $19 range, it would be a buy. The next few months will be a good chance to buy more.

Should you invest $1,000 in CIBC right now?

Before you buy stock in CIBC, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and CIBC wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,345.77!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Mancini has no position in any stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Energy Stocks

A meter measures energy use.
Dividend Stocks

Where I’d Invest $15,000 in Top Utilities Stocks for Steady Income

These utility stocks are some of the top choices, but they aren't the usual group of investments.

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

How I’d Allocate $1,000 in Energy Stocks in Today’s Market

Discover why energy stocks are crucial for Canadian investors as the election approaches amidst tariff challenges.

Read more »

oil and natural gas
Energy Stocks

3 Canadian Energy Stocks to Buy and Hold for Decades of Passive Income

Energy stocks can be some of the best choices for consistent income, and these three remain top performers.

Read more »

oil and gas pipeline
Energy Stocks

Why Billionaires Are Pulling Cash Out of U.S. Stocks and Buying Canadian Energy

This analyst-recommended energy stock could be one to watch in 2025.

Read more »

oil pump jack under night sky
Energy Stocks

Top Energy Stocks to Invest in 2025

Most investors are avoiding energy stocks over fears that Trump tariffs could bring a structural change in the energy supply…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Why I’d Include These 3 Essential Dividend Stocks in My TFSA

Here are three dividend stocks I’d include in my TFSA today.

Read more »

Asset Management
Energy Stocks

Why I’d Consider These 3 Small Caps for a $5,000 Investment With Long-Term Horizons

Investing in small-cap stocks such as Vecima and Total Energy should help you deliver outsized gains over the next 12…

Read more »

canadian energy oil
Dividend Stocks

How I’d Invest $4,000 in Canadian Small-Cap Stocks to Potentially Double My Money

This year I'm buying energy stocks like Suncor Energy Inc (TSX:SU).

Read more »