After around forty years of making a living from financial markets in one way or another, I am not often left scratching my head these days. I may not agree with every move, but I can usually see the logic behind them. This week’s big drop in oil prices, on the other hand, mystifies me. I can, I suppose, see that it was a “buy the rumor, sell the fact” kind of thing, but the timing of the move and its complete disregard of news that positively impacts fundamental factors was a bit puzzling.
After two months that saw crude jump around twenty percent, a pullback was coming at some point, almost no matter what. That is why I wrote here three weeks ago that I was beginning to trim some positions in oil stocks, not because I expected a collapse or anything, but just because it was time to take some profit, knowing that I could buy back in if oil did pull back for technical rather than fundamental reasons.
When that pullback started as the OPEC+ meeting approached, I began to get a bit nervous. Did the market know something I didn’t? Had there been massive behind the scenes pressure from Biden and European leaders who were suffering politically because of rising energy costs? Were we about to see another easing of output restrictions?
The answers were no, no, and no but that didn’t seem to matter.
One gets the feeling that, far from feeling pressure as a result of the discomfort of Biden, Johnson et al, the primary drivers…