August 21, 2024 at 06:40PM
Bond bulls are happy, stock market bulls are happy and gold bugs are dancing in the streets. Everything is rallying right now as the market prices in a good economy, rate cuts and immaculate disinflation.
Meanwhile, oil bulls haven’t been invited to the party.
Crude tried to stage a rally and was up nearly $1 at point point in US trading but is now down $1.23 after a tighter US inventory report failed to sustain gains. Barring a miracle turnaround, this will be the fifth straight day of selling and the first settlement below $72 since January.
There is still some hope for the bulls as the intraday low on August 5 was $71.61. Mind you, that was at a time when it looked like world markets were imploding, so it’s not exactly comforting.
One drag is the seasonal setup. Sept-Nov is traditionally the worst time of the year for WTI and we’re just approaching the dawn of that.
Otherwise, oil bulls are frustrated because there isn’t a clear catalyst for the move. Global inventories are tighter than any time in the past five years and continuing to draw. OPEC is staying disciplined, demand indications are fine, China has floated stimulus again and production is flattening.
A big worry is the plan to bring on OPEC supply late this year and the message is that those planned production returns might need to be delayed through Q1. If so, that could prompt a quick turn because the spec market is extremely short.
Finally, it looks as though the Middle East situation has calmed down and that premium has been removed so I don’t see that as a fresh potential source of downside pressure.
In any case, whatever is driving the move has oil bulls feeling sick and I expect that will lead to a puke soon; if not there could be a real bounce because it’s tough to square what’s happening in oil with other markets.
This article was written by Adam Button at www.forexlive.com.
