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Why Crude Is Likely To Drop Below $100 Again

Oil

As I’m sure you are aware, after skyrocketing to just above $130 on the prospect of no Russian oil on the world market following the Russian invasion of Ukraine, oil dropped just as quickly back to the mid-90s on news of peace talks, then retraced that move as far as the $100 level as the war dragged on, where it is hovering as I write. Obviously, that is some pretty spectacular volatility over a period of two weeks or so and it leaves two questions for traders. Is it going to continue? And, whether it does or not, where will the next move take us?

The answer to the first question is probably no, at least not to the same extent. Traders are like sports talk radio hosts; they are professional overreactors. Just as talking heads concerned with nothing but sports tend to see every trade and every scandal as the most important thing in the world on any given day because of their narrow focus, so a trader sitting at a desk monitoring news relevant to their market exaggerates the importance of every happening and utterance.

That mattered on the way up, where the possibility of the elimination of an oil source that supplies a small percentage of U.S. needs caused a nearly 50% spike in WTI. Yes, that problem hit an already tight market and yes, it came as demand was recovering from the latest hit from the omicron Covid variant, but even so…50%? The problem from a trading perspective is that even though you may know deep down that that makes no sense, you are almost forced…





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