Oil prices fell Monday. Traders cited incoming sanctions on Iran. The sanctions were described as the toughest ever. This marks the fourth time in a decade someone used that exact phrase about Iran sanctions.
The price moved down because people anticipated something might happen later. Not because it happened. Because it might happen. They sold barrels of oil that don't exist yet based on a policy document nobody had read.
Washington billed these as toughest-ever sanctions. Previous sanctions were also billed as toughest-ever. The sanctions before those? Also toughest-ever. Turns out you can have infinite toughest-evers if you just keep saying it.
Retail traders opened their apps Monday morning. Saw the headline. Checked the technicals. The 50-day moving average said one thing. The sanctions headline said another. They went with the headline. Sold everything. Then they Googled where Iran was.
The sanctions will target Iranian oil exports. This will reduce global supply. Reduced supply raises prices. So naturally oil prices fell. Makes perfect sense if you've suffered repeated head trauma.
Professionals traded the announcement of the announcement. Amateurs traded the announcement. By the time the actual sanctions hit, everyone will trade the retrospective analysis of whether the sanctions worked. Nobody will trade oil.
The chart from last Tuesday looked identical to the chart from Monday. Twenty-year monthly view? Same pattern. The sanctions could ban Iran from existing as a physical territory and the logarithmic trend would hold within half a percent.
But some guy in Connecticut with a Robinhood account and a podcast about geopolitics needed to do something. So he panic-sold his energy ETF at a loss. Then he bought it back Thursday after a Bloomberg contributor said the sanctions would actually be bullish. He paid fees both ways.
Photo by Amin Zand Miralvand on Unsplash
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