In financial markets, very few things are predictable; if they were we would all be fabulously wealthy. Some things, though, definitely fall in the category of “extremely likely”. A couple of weeks ago, in a regular webinar for Energy Trader Team members, I said that, while the fundamentals for oil still looked terrible, I expected something to happen over the next few weeks that would push oil higher, maybe even back to the $50 level.
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Sure enough, that thing happened yesterday and triggered a roughly 5 percent one day spike in WTI, a move up that is continuing so far today. It was not anything concrete like a dramatic fall in inventories: in fact the big red bar for two days ago indicates the release of that data, which showed another larger than expected build. No, what set the market ablaze was a prominent OPEC member using the oldest trick there is…talking his book.
Khalid al-Falih, the Saudi Arabian Energy Minister, talking about an informal meeting of OPEC countries in Algeria in late September, said that member countries would discuss the market situation at that meeting, including any actions that could be taken to stabilize prices. It is a strong testament to the power of hope that those comments caused such a spike in oil. What al-Falih actually did was state the obvious. I mean, what else would a gathering of OPEC ministers talk about…the price of fish?
That doesn’t mean…