It’s been one week after the ‘magic’ oil supply deal was extended between OPEC members and Russia and it’s been followed by just about the most pessimistic response I’ve ever seen to bullish news.
Now as a trader, no one is more familiar with the axiom to ‘buy the rumor and sell the news’, so this drop in oil prices and even more vicious drop in oil stocks should not have come as much of a surprise to me.
But quite frankly, it did, as has the pessimism that has surrounded the oil markets since the announcement in Vienna. I suppose it’s an easy position to take; after all, if a combined OPEC/Russian deal to limit production through the Spring of 2018 can’t make prices go higher, what can?
I’ve seen analyst after analyst quaking in their boots over the continued production of U.S. frackers and the unintended consequence of derailing the OPEC deal and keeping prices low.
Others continue to wonder whether OPEC could have cut even more to out balance whatever increases U.S. producers were going to deliver.
Others have even managed to challenge the Saudis themselves, calling into question their strategy of re-balancing global oil, either suggesting that the Saudis work more like Central Banks in telegraphing their long-term intentions, or just abandoning production guidelines entirely and forcing some well-deserved bankruptcies to remove uneconomic oil production the old-fashioned way.