The main driver here appears to be the unwind in cyclicals and commodities as we see the brakes pulled in the inflation trade. In this sense, Oil itself tends to be rather immobile. And yet (for OPEC+ still has some vitality although diminishing) it is not rare to find the trigger for this will come in the display of an increase of considerable activity on the supply side!!
From the previous posts and charts, the maps of elasticity are all very clear and we can see ourselves when its time to track for the appropriate shifts in policy.
a) the journey towards the lows via contraction in globalisation
b) from the monthly chart
c) the positional yearly flows and blockade at 75
In this simplest of all positions, the blockading of cyclicals and commodities via inflation taking a short holiday; of course the storm will pass and we will see further exploitation of CPI and etc but all of that is not relevant for today's chart. Our highs appear to be set, time for the traditional bow to our boss at 75, greet our colleagues at 70 and head out fresh and rested for a trip towards 68 and 57. The seats are still warm, you have seen the flows here performed again and again.
We are trading elasticity, and the effect on demand and supply as such. No more, no less.
Demand is nowhere near where it was before Covid 19 crisis. And even if OPEC was to increase supply I think there is still much more upside for oil. Especially if USD will continue to decline. I think it is more likely we will see 80 USD per barrel than 57 USD per barrel.
Michael_Harding
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@Tradersweekly, it's the futures market that drives up prices
Tradersweekly
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@Michael_Harding, Alright... and here I thought interaction between supply and demand drives price.
@Michael_Harding, I trade oil through derivatives mainly. I understand that you are trying to point out backwardation in oil futures. But what I stated is basic premise of technical analysis as price action is always result of interaction between supply and demand. Whether market is in contango or in backwardation does not necessarily drive market in any direction.
Michael_Harding
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@Tradersweekly, ya but it's future demand that's getting priced in. I'm not saying oil prices will drop if that's what you interpreted.
Tradersweekly
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@Michael_Harding, There are instances when futures trade in backwardation and despite this phenomenon market keeps rising over the time as futures expire. And vice versa.