When trading, it is easy to get caught up in the feeling that you must always have a view. There are stories told and movies made about traders who see something others have missed and stick to their view as they courageously risk everything. There are two main differences between the movies and real life, however. The first is that in real life the majority of people who trade like that go bust, the second that even when you are paid to have a view of a market, there are times when you just don’t know where it is headed. Right now, that is how I feel about crude.
Whether I consider the fundamental factors or look at the chart for inspiration, the conclusion is the same…WTI futures could break either way.
From a fundamental perspective, it is all about demand because the supply picture is now pretty clear. OPEC+ are gradually adding back production and a drop in the rig count last week suggests that the gradual increase in North American supply that came as the world recovered from the initial shock of the pandemic may have peaked. That picture of gradually increasing supply fits with a world where demand is gradually increasing too, but that is far from certain. The rise of the delta variant has shown that there are enough people who can’t or, for whatever reason won’t get vaccinated, that mutations of the Covid-19 virus could remain a problem for years to come.
So, with predictable supply and unpredictable demand, it is hard to…