The Wall Street Journal article on communication from OPEC and trader and investor response may be gated
The link is here: Is OPEC All Talk?
I want to digress from the point of the article, and just focus on this in it (bolding mine):
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A now-familiar pattern ensued Monday after Venezuelan President Nicolás Maduro said the world's big oil producers were close to clinching an output deal
- prices rose more than 1% early that day
- and then quickly fell
Oil traders and analysts increasingly see the statements as an OPEC ploy to prop up prices short term:
- "You have to take it seriously when big producers talk of production cuts, so that's why prices shoot up initially," said Rob Thummel, portfolio manager at Tortoise Capital Advisors, which manages $15 billion in energy assets. "But investors quickly realize that this is just talk and no action and those rallies fizzle out quickly."
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Let me propose an alternative market dynamic ...
Venezuelan President Nicolás Maduro said the world's big oil producers were close to clinching an output deal
Some traders already short oil thought to themselves "If other shorts get nervous, they'll buy on a statement like this ... I better buy first to cover first ...", this triggers more buyers
so that's why prices shoot up initially
As prices rise, new sellers, perhaps with deeper pockets are attracted to short, as well as those who covered but now want to get back short again ... thus ...
and those rallies fizzle out quickly
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So, there is my alternative explanation. I don't believe its one or the other, but a bit of both.
