2017 hasn’t seen much volatility in oil prices, something we might not have expected with a new administration, a change in Fed policy, Brexit and a hundred other smaller events this year. So, what’s left to move oil prices, if the most common inputs aren’t having much impact?
Normally large global trends of production, OPEC plans, rumors of war and actual hostilities will have a significant impact on prices. In recent days, however, we’ve seen a large tomahawk missile strike on Syria and a use of the “Mother of all Bombs” in Afghanistan, with nary a quiver out of oil prices.
What tends to impact oil prices more than anything else – at least when other inputs are being discounted – is the movement of money in and out of futures markets. Those bets represent what players with a real financial interest think about future oil prices. Further, those bets are not just an indication of how financial players are thinking, they can be a primary indicator of what the next intermediate (and even long-term) move on oil prices will be.
This was one of the main theses of my first book - Oil’s Endless Bid. At the time of its publication, this idea was scoffed at by virtually every oil analyst out there. Today, measuring the financial motion of speculative money in and out of oil futures is considered a necessary tool for anyone trying to gauge oil’s next move.
But take care: Intense bets that oil will rise…