There’s No Strong Fundamental Reason For Oil’s Decline

The oil markets continue to be gripped with the continuation of violent selling in the last week, displaying what I can only describe as a ‘traditional’ puking:

(Click to enlarge)

Notice, over the last 5 weeks how consistent the pattern has been: a long downwards session candlestick, achieved under normally heavy volume, followed by 2-4 sessions of slower, digestive, lesser volume sessions that might attempt at retracement higher, but ultimately fail with another violent down-move under heavy volume.

This type of action is classic – and yes, it is definitely trend reversing, at least in the medium term. But more than that, it indicates just how convincingly hedge funds and other speculative accounts have been exiting longs, and in fact, begun establishing momentum shorts in the futures markets. This ‘two small steps up, one giant leap down’ is precisely indicative of this lone speculative trading pattern affecting the oil markets at large.

During these moments, you can take the fundamentals – no matter what they might say to you – and toss them. Until you see a stability in hedge fund positions, that selling pressure from longs reversing to shorts will override everything.

This financial pressure on oil has been helped along in every case by widespread media bashing of the oil complex. For example, several articles have delivered bearish headlines of OPEC reducing their demand forecast for 2019,…