Oil News Sentiment Captures the Firmness in Crude Prices, Is the worst over for Oil?

The last couple of weeks have been good for crude prices. Around middle of May, WTI Crude prices started to break out from a USD 25 per barrel price range to a higher range. But first, the prices were forming a base at that level. For the last ten days and more, the prices have been consistently above 30 dollars and they are fairly stable. While upward price movement is important, we think a fairly consistent and narrow range is equally relevant.

Fig. 1: WTI Crude Price over last three months

Now comes the more interesting part. The next chart shows the EMAlpha Oil News Sentiment. While the Sentiment is volatile and it should be because it is based on multiple unstructured and varying data points, the Sentiment is clearly showing a significant improvement in last fifteen days. As such the average EMAlpha Oil News Sentiment in May is much more positive than either March or April. In last two weeks, the volatility also has been on the lower side.

Fig. 2: EMAlpha Oil News Sentiment

This implies that the news Sentiment is doing a good job in making the price forecast. As we had highlighted in our insight on May 14, 2020, the Oil Sentiment was having its ‘break out’ moment around 10th of May and this change in oil news sentiment indicated that we are past the worst of Coronavirus crisis and things will get better from now on. This is how exactly it has turned out. On the basis of oil news sentiment, it is unlikely that Oil is going below 30 dollars in near term. But we will keep a watch.

Research Team
EM Alpha LLC

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About EMAlpha:

EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious.Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.

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