Basic economic theory would suggest that pricing of goods and commodities is pretty simple. It is a function of supply and demand. Reduced supply and/or increased demand create scarcity that pushes price up and the opposite is true if supply is increased or demand falters. Anybody who has ever traded, however, knows different. What is usually much more important is the anticipation of such changes. All markets are forward discounting mechanisms, so pricing reflects a combination of the past, present and predicted future of supply and demand conditions. Usually the expectations for the future are the most powerful influence, but at times, and now is such a time in the crude oil market, there are conflicting messages about the future, and something else drives pricing. In this case it is proximity to what is increasingly appearing to be a critical price level.
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That level is, for WTI, somewhere around $51-52. To understand the significance of that level you need to look back at the chart for the second half of last year. At that time WTI was in a long term recovery from the lows below $30 and was being driven higher, in part, by the anticipation of, and then the reality of, supply reductions by OPEC.
Despite that strong influence, however, upward momentum stalled twice at around the $52 level. At the time there were several reports that what was causing that resistance was some big selling, presumably as a hedge, by several large…