A wave of real money selling is what turned a fall in oil prices into a rout on Thursday.
I spoke with some contacts in the oil market and they said a wave of producers hedging are what cut the legs out of the market.
WTI crude intraday
There was a serious disconnect between what OPEC and analysts were saying. You have to give OPEC credit for transparency, none of the Gulf countries and virtually no one else gave a signal that cuts were coming. There were a multitude of ‘sources’ reports that said no cut was coming.
Meanwhile, all the talking TV heads were nattering about the likelihood of cuts. Those same people were talking to the oil producers and telling them to be patient with hedges and whatnot.
Fast money sold on the OPEC headlines but began taking profits almost right away and crude bounced more than $1.
Speculative moves, and even short covering, just can’t drive a move like the second wave down to $67.75. That was oil producers — now on the verge of unprofitably — calling up trading floors and telling them to hedge as much production as they could.
