As the rout in oil prices nears the 20 percent mark that for stocks would signal a bear market, many analysts offer a word of caution: Don't mistake a healthy correction for the end of a multi-year bull trend.
The 16 percent slump since its record-high close of $145.18 a barrel on July 14 could yet deepen to $100 a barrel, many analysts say. But equally many remain convinced that another surge to as-yet unconquered peaks may lie just months ahead.
"Maybe in financial markets 20 percent means the trend has changed, but in the case of commodities we are not really looking at it like that. Commodities are based more on fundamentals," said Tetsu Emori, a fund manager at Astmax in Tokyo who regularly analyzes charts for price direction.
The U.S. Dow Jones industrial average entered bear market territory — marked by a 20 percent fall from a closing peak — in late June, but similar setbacks in commodity markets have proven less prescient.
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Those who might have mistaken oil's last deep fall — a near 21 percent decline over four weeks to mid-January 2007 — for a sustained pull-back paid dearly. Prices hit a low of $49.90 a barrel before nearly trebling over the next 18 months.
Dealers who trade on the basis of technical indicators are looking at more crucial figures, such as the 100-day moving average. Prices fell below that level on Tuesday for the first time since early February, hinting at more to come.
"The 20 percent retracement being an indicator of a bear market doesn't have quite the impact as pushing through the 100-day moving average at $122. That's what analysts and traders were really looking at," said Jonathan Kornafel, Asia director at U.S.-based options trader Hudson Capital Energy.
For Emori, a break below $117 to $119 could trigger a slide to around $100, but "even if that happens I don't think it will mean that the long-term bull trend will be finished."
Bullish long-term structural issues such as growing Asian demand and lackluster non-OPEC supply growth remain unresolved, market bulls argue, suggesting the market may have yet to see the highs, regardless of indicators on candlestick charts.
"We've seen a spectacular rise, so 20 percent is not a bear market at all," said Mark Pervan, commodities analyst at ANZ Bank. "This is really steam coming out of the market."
"We can't realistically expect it to remain around these levels with new demand coming into the market."
Crude oil is no stranger to some deep corrections during a six-year price boom that has lifted U.S. crude from around $20 a barrel at the start of 2002.
In early 2003, before the rally even hit its stride, prices collapsed from a pre-Iraq war peak of nearly $40 to below $25 a barrel. They hit the skids again in mid-2006, falling from a high above $78 to a January low of $49.90.
The market didn't make a new record high until August 1, just over 12 months after the previous peak.
While the market will almost certainly need a breather before attempting to scale $150 again, the increasing pace at which prices are rising and falling may suggest that the wait won't be as long as in the past.
"Hedge fund longs have now reversed their positions and are trading the market from the short side," said Kornafel.
"I wouldn't be surprised to see some recent profits booked and as potential hurricanes loom in the U.S. Gulf there could be a mad rush for the exit, pushing the market right back up again."