Three days to wipe out Monday’s drop
One thing to always keep in mind about oil is that the physical market is 25x larger than the financial market. The real money flows are enormous.
At times, the market will give you some insight into the underlying dynamics. This week’s rally really kicked off with US inventory data. The headlines numbers weren’t great but under the hood, they showed fall in US exports and jump in imports.
Elsewhere, inventories are being drawn down and signs of gasoline demand are picking up, even with delta clouding the picture.
I think the message from the drop and quick recovery in crude is overwhelmingly positive. I might have expected to see a slow climb back but rushing right back above $70 shows the market for oil is tight. We also now know the game plan for OPEC through year end. Barring virus problems, that’s going to keep the market tight.