I’ve been trading oil and learning about oil companies for 30 years, and one thing I can tell you is that the common wisdom about the oil market is almost always simplistic, unreliable and wrong. I was openly bullish on oil as it approached $90, because I know that the strength of the dollar is a spurious trading connection that has never been as strong as right now.
I also don’t believe in the commitment of the Saudis to a price war – today’s report showed that, true to form, the Saudis cut production in September to match their drop in the OSP. But they also know that their unilateral production cuts can’t make much of a difference on their own, at least in the short run, hence their expressed comfort with lower oil prices.
I further found it hard to believe that inventory reports showing domestic oversupply would matter much – we had been laboring under a secular oversupply situation for close to a year, rallying for most of that time.
But, despite how bullish I was at $90, I’m also convinced that although oil in the $80’s will be temporary, it won’t be short-lived. And I know how inconsistent that sounds.
I’ve traded this market for decades, written a book and several hundred columns and one thesis on oil and what continues to inform my thinking more than any other analyst are the financial inputs into oil. I watched as the speculative trade that has been a bedrock…