• 4 minutes Some Good News on Climate Change Maybe
  • 7 minutes Cuba Charges U.S. Moving Special Forces, Preparing Venezuelan Intervention
  • 12 minutes Washington Eyes Crackdown On OPEC
  • 15 minutes Solar and Wind Will Not "Save" the Climate
  • 2 hours Why Trump will win the wall fight
  • 9 mins is climate change a hoax? $2 Trillion/year worth of programs intended to be handed out by politicians and bureaucrats?
  • 6 hours Prospective Cause of Little Ice Age
  • 46 mins students walk out of school in protest of climate change
  • 5 hours L.A. Mayor Ditches Gas Plant Plans
  • 6 hours *Happy Dance* ... U.S. Shale Oil Slowdown
  • 17 mins Maduro Asks OPEC For Help Against U.S. Sanctions
  • 2 days Most Wanted Man In Latin America For AP Agency: Maduro Reveals Secret Meetings With US Envoy
  • 1 day Ford In Big Trouble: Three Recalls In North America
  • 10 hours And for the final post in this series of 3: we’ll have a look at the Decline Rates in the Permian
  • 16 hours IT IS FINISHED. OPEC Victorious
  • 1 day Why Is Japan Not a Leader in Renewables?

Why WTI Is Stuck In A Range And Why That Is Good for Traders

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.

(Click to enlarge)

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…

To read the full article

Please sign up and become a premium OilPrice.com member to gain access to read the full article.

RegisterLogin



Oilprice - The No. 1 Source for Oil & Energy News