Wednesday, January 25, 2017

OPEC Deal Is Sticking, But...

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*Prices are going down anyway.

*Oil prices have gone down since production cuts.

*What's worse is our data would confirm OPEC is actually sticking to the agreement and oil still went down.

*That's bearish.

Price Action In Oil Matters
Oil is not a stock or an index. Stocks and indexes are based on perceptions around future earnings, cash flows, interest rates, economies and even whims. Oil prices are based more on supply and demand itself. Therefore global supply and demand can hedge in the open market based on expected needs or expectations of actual transactions.
Following the price (technicals) is really a fundamental exercise because it is the balance of global supply and demand in the world to some degree. Equity supply and demand is not directly related to supply and demand of the business' products itself like the oil price.
When we can decide on key levels and compare that to news we can understand on some level what's going on in the market.
What's going on in the market?
OPEC members decided on a historic cut of oil production with the sole intention of raising oil prices. What do you think oil prices should do based on that? Of course they should go up. If they start to go down, that means this historic effort is facing offsetting supply and demand pressures. Either supply is increasing or demand is decreasing offsetting OPEC's efforts.
Source: Interactive Brokers
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