Long-Term Perspective, Crude and the 10-Year Yield

This week, I will use monthly charts because they provide a more long-term perspective on what has happened, and may provide clues where things might be headed. A teacher of mine once said, to see the trend better, pull back on the timeframe. In that spirit, this New Year post will try to focus on the bigger picture in order to prepare us for 2023.

Crude ended the year right around $80/barrel (bbl), up 4.81 [+6.38%] for 2022. The gasoline chart looked similar: +0.26 [+11.76] to 2.48 for 2022. Both items rallied strongly for the first part of the year, and then fell, giving back most of the gains. Open interest remains quite low, but the doji candle print was just mildly bullish. Crude appears to be trying to put in a low here in December, but we really need a higher close to confirm.

Last week, the Biden-Handlers drained 3.5 million barrels from the Strategic Petroleum Reserve (SPR), which brings the 2022 oil theft to 218 million barrels, the most ever in history. Because – climate change? Which used to be called Global Warming, until things stopped warming, resulting in the rebrand. The SPR is roughly at levels last seen at the start of 1984. Note: chart below is a yearly chart.

The 10-year treasury yield (DGS10) rose a massive 236 basis points in 2022, ending with a yield of 3.88%. The yearly chart (not shown) shows DGS10 at the highest year-end yield since 2007. DGS10 remains in an uptrend, and the December candle print looks reasonably bullish too. What will happen to all those pension funds that bought the 10-year when it was yielding 1% back in 2020? They are sitting on some ugly losses. Hope they aren’t leveraged, or else – No Pension For You – unless, of course, it gets rescued by the taxpayers (i.e. once again, You and Me). It looks to me that last month’s drop was just a correction in an uptrend. Maybe. My guess: higher yields ahead. Not financial advice.