Thursday’s, trading in WTI futures was crazy, even by the standards of oil’s somewhat volatile nature. One of the things that makes oil attractive to traders is that while there is that short-term volatility, it usually comes within a discernible long-term trend that is based on fundamental conditions. Thursday’s trading, however, reflected conflicting fundamental conditions and we saw the kind of price action that frequently marks a shift in long-term direction. That, and the common view amongst analysts that oil goes higher before too long, may make it seem that we are about to reverse and move higher. I disagree.
The intraday chart for Thursday shows three moves of a couple of bucks or more, up, then down, then back up again within a period of less than twelve hours. And, as I took this snapshot at 2:50 pm EST, it looks like a move back up may be starting. As I said, crazy, right? It is, however, understandable, because oil is being pushed around by some conflicting forces.
The move up in the wee hours of the morning came as OPEC suggested that they will consider some output cuts at their next meeting. That just highlighted the fact that, even as oil prices have fallen quite dramatically from their highs, supply has remained tight. The prospect of reducing that supply to what is at best a balanced market based on current consumption resulted in an understandable run up.
Then, just before US markets got fully underway, there was…