Last week, I talked about the illogicality of recent moves in crude, and there has been more of the same this week, if anything even more pronounced. I guess I should be used to markets behaving illogically after nearly four decades of working in and around them. In fact, I am not even sure if a counterintuitive move such as we saw this week in crude can be called illogical when it happens so frequently. Still, there are times when a move, particularly following a news or data release, puzzles or even shocks me. This Wednesday was a case in point.
I am sure that if you subscribed to a newsletter from Oilprice.com you are aware that Wednesday is a big day for oil traders. At 10:30 every Wednesday morning, the EIA releases their oil inventory report, data on supply and demand for domestic oil. Usually, the market reaction to the report is predictable enough. If inventories increase more than expected or decrease less than expected it indicates higher supply and/or lower demand than the market has priced in and crude drops. The opposite is also true, prices rise should storage numbers decrease more or increase more than expected. There are sometimes extenuating circumstances such as changes in gasoline supply and demand, but with those in mind, subsequent moves usually tend to make sense.
This week there was no excuse and no logic. Crude just did something weird.
The EIA numbers on Wednesday were about as bad as they could be. Going in, the market was expecting…