In our last review of Google Trends data (see post here) as it related to the price of oil, we noted that there appeared to be some correlation during times of volatility with the key phrase ‘price of oil’ particularly when isolated to searches in the regions of Alberta and Texas. Search spikes were typically in response to increases in price volatility in the price of oil, while the normalization of searches often coincided with a decrease in oil price volatility.
Since our earlier comments, we’ve noticed an appreciation in the price of oil from $45 > $50. Searches since September appear to be on the rise, nowhere near the search spikes of January of this year, but nonetheless sending the signal that there may be some volatility to come. At Oil’s current price of $50, it is testing a high established in early June and where an appreciation above this level would signify further bullish movements, while a reversion from this level suggesting further price consolidation.
We can’t say that Google searches and price movements are a 1-1 scenario, that is searches are not perfectly correlated to the price of oil, but during times of significant price volatility the relationship appears to coincide much better. With searches slightly appreciating, we are inclined to believe that the price of oil may revert slightly from this level. Keeping in mind that small changes in searches are not perfectly correlated with movements in the price of oil, taking a long position price point may not be the worst of ideas as it would appear most of the volatility is now behind us.