Oil fell Monday. Crude flows remained surprisingly strong. The price still dropped. Makes perfect sense if you've had a lobotomy.
Traders are watching for a recovery in shipments from Saudi Arabia. The shipments that are apparently flowing just fine. Strong, even. Surprisingly so. But sure, let's watch for a recovery of something that's already happening. It's like waiting for your car keys to show up while you're driving to work.
The headline tells you flows are strong. The price action tells you nobody gives a sh*t. This is what happens when fundamentals meet a market that reads tea leaves and astrological charts. Somewhere a retail trader just bought crude futures because his cousin's friend works at a gas station and said things seem busy.
Mideast tensions continue to escalate, which used to mean something for oil prices back when markets operated on cause and effect. Now it's just background noise. Tensions escalate every Monday. They escalate on Wednesdays too. Sometimes on weekends if we're lucky. The geopolitical risk premium is now worth about as much as a participation trophy.
Saudi Arabia could shut off every tap tomorrow and crude would probably fall another three percent because Mercury went retrograde or some hedge fund algorithm detected a head-and-shoulders pattern in the 47-minute chart. The flows are strong but the conviction is nonexistent. Every trader on earth is positioned for the last thing that happened, which is why oil falls when supply is tight and rallies when nobody needs it.
The technical picture says oil bounces at 68. The fundamentals say it should be at 85. It'll probably close at 71.43 because that's where the maximum number of stop losses are clustered. Supply and demand died in 2008. We just keep pretending they matter because it feels wrong to admit we're all just gambling on which way the algos break their stops.
Photo by Zbynek Burival on Unsplash
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