How Significant Is WTI's Break Above The 200 DMA?
Todd Sullivan | Apr 02, 2019 08:11AM ET
Is it meaningful that WTI just popped above its 200 day moving average?
In reality, past prices are no indication of future prices. Prices are set by market psychology and not some signal coming through based on fundamentals as many promote.
Tomorrow the API Oil report comes out with the EIA US Oil Situation report on Wednesday. We are just exiting the Spring catalyst change-over where refining inputs are low and US crude inventories build. As soon as refineries come back online, US crude inventories drop. That we are just above the 5-year US Crude Inventory average will likely see current inventory levels plummet below this benchmark. Current inventories falling below or rising above the 5-year moving average have always been met with rising/falling prices as traders misinterpret short-term data to have long-term meaning.
The long-term history of oil prices does not show higher or lower levels of production versus inventories as drivers of the price the way traders indicate every week. But, believing in these signals generate shifts in market psychology which shifts prices accordingly. Near term, we are likely to see higher oil prices due to traders who believe past prices predict future prices.
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
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