Crude Oil's Smoke and Mirrors

November 16, 2016 12:25PM CST

Crude oil is likely being supported by the euphoric nature and fallibility of market participants going into OPEC. The smart traders know this. “Buy the rumor and sell the fact” Right now fundamentals do not equate to lower prices based on supply and demand. Per my research, we can connote that the global supply is larger than last year and that demand is less globally. This is happening at the same time producers are ramping up in the US. Historically, we are in the season of directional change! Crude usually comes off this time of year and coupled with domestic supply, growing rig counts would be trading well under $40 and rightfully so. The euphoria trade comes in at precisely $42.20 on Dec Crude by being enhanced from OPEC headlines we gravitated to $46 and failed. This failure did not go unnoticed, as we saw a build in API and in DOE the following day (of over 5mil bbls) begin to break down. The deterioration happened within four minutes of hitting down side support at $45.04, and was just about ready to break down further, as the Russian Energy minister came out like an archangel sent on a mission from OPEC to stop the market from selling off. Novak, the savior, proclaims a bullish headline, “RUSSIAN ENERGY MINISTER SAYS HE HOPES OPEC COMES TO AN AGREEMENT BY NOVEMBER 30th” which resumes the rally. This type of headline and more will most likely be channeling pricing towards $50. This has been the norm in the past leading up to OPEC meetings and should be the norm again. This time the pressure is much higher for OPEC to do something. We shall see.

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