Usually, when a market move makes no sense to you, it is you that is wrong. As my old dealing room boss loved to say, or rather shout, the market cannot be wrong. It is simply a reflection of the last place two people were prepared to trade, so it is always right. Still, there are times when I look at a move and just scratch my head. Now is one of those times.
Over the last month or so, WTI futures (CL) have shot up around forty percent. Given that U.S. supply has been falling as the economic recovery from the shutdown continued and that that is reflected elsewhere in the developed world, that makes perfect sense…up to a point.
That point came this week, when the move up continued to a new nine-month high, even as some of the factors that have caused it started to look a bit wobbly, to say the least.
On the demand side, the world, and the U.S. in particular, is seeing a resurgence in Covid-19 cases, hospitalizations, and deaths that have resulted in a return to partial shutdowns in some states and the prospect of more to come. Of course, I understand that there has been significant progress on the vaccine front and that the U.K. has even begun the rollout of one version but what does that mean in the short term for U.S. demand?
To be honest, very little. Health experts are saying that even if one or more vaccines become available before the end of this month, other restrictions will probably have to stay in place for at least several months…