The bubble on the futures markets for crude oil is getting bigger and bigger. Traders report increasing exposure to put options. We don´t even need to talk about the long overhangs in futures contracts. Of course, there is always the motto “the market is always right”. But this increase in WTI and Brent is more than frightening.
The prices had been running very well during the last weeks. And then yesterday we saw the extremely high attention paid weekly crude oil inventories in the US, which were reported at -1 million barrels on a weekly basis, as expected. This means: nothing great should have changed afterwards in the Oil Price, because expectations are always (!) already priced into the market.
But after a few minutes of dancing with the ALGOS (computer programs), after 10:30 am EST, the futures market decided to raise the WTI price by 1.5 dollars to 66 dollars until yesterday evening. So far, it has even increased to 66.34 dollars. This is an increase of almost two dollars within 24 hours. It´s incredible. The oil stocks as a reason did not provide this increase, but are still being pushed forward by some market players today.
When you are in a self-propelling bull market with full power, it´s always good to be able to create some kind of reason why the bull market keeps going on and on. Listening to analysts and traders, they also name the oil stocks as the reason, because they´ve been falling for weeks. It´s also mentioned that earlier this week the Saudis said that cooperation with non-OPEC countries will continue to take place after 2018 (regarding the current reduction in production volumes).
Well, as an oil bull you can see this as a reason to push the prices further. But the current 2 dollar increase has to be clearly linked to yesterday’s stock data. And so this price increase is not justified. Many market participants cite the great economic situation as one of the main reasons for this, no matter where you look on the planet. Just great numbers, just growth. This, of course, pushes the imagination for a significant increase in oil demand, worldwide!
All right, that too may be a reason for rising oil prices. But here’s the chart again since March 2017. Can it continue like this without any correction? The air is getting thinner and thinner. Well, you could have said that also at a 60 dollars price level, but only this line drawn chart says it all. From June 2017 to now you can see an increase from 45 to over 66 dollars. That is an increase of 47%.