Oil Bears Flummoxed

We recently posted an update on crude oil, entitled “What’s Up With Crude Oil?”, in which we shared our technical and sentiment observations on the oil market, as well as our admittedly rather limited knowledge of the market’s fundamentals (a number of charts illustrating the fundamental backdrop can be found in this previous article). The in our opinion at the time most important and noteworthy fact was that in spite of the market’s healthy technical condition, it was accompanied by a lot of anecdotal evidence showing widespread incredulity at the market’s strength. It was no exaggeration to speak of a deeply ingrained bearish consensus. We wrote:

“The main reason to talk about crude oil these days is its stubborn refusal to go lower. There is a fairly widespread anecdotal consensus that prices will – nay, must – come down. In fact, only veryrecently the US Energy Information Administration (EIA) opined that the sharp increase in US domestic production portends lower prices in the future. It presumably had to point to the future because it is definitely not producing lower prices in the present. In fact, Monday’s close in spot WTI at just above $97/bbl. was right at the upper end of its multi-month range and only a hair away from what would be a noteworthy technical breakout. This is evidently not what the consensus would expect, especially in view of the fundamental data accompanying this show of strength.”

……read the rest HERE (be sure to read the conclusion)