The WTI Crude Oil markets absolutely cratered during the Thursday session as the market opened with a massive gap lower, and Falling. All commodities around the world got whacked, and of course oil was going to be no different. There are a lot of concerns out there about various things, but one of the things that seems to be pulling this market specifically is the fact that the US dollar continues to rise in value. Simply put, WTI Crude Oil is sold in US dollars, so therefore it takes less of them to buy oil.
That being said, the supply and demand equation has been completely out of whack for some time now. There simply isn't anywhere near enough demand to ask prices near $100 a barrel, so this pullback was long overdue. I have to admit though, it has been rather brutal during the Thursday session, and I would not have expected it to selloff quite this quickly. However, with the Federal Reserve looking to step out of the quantitative easing game, traders are simply going after trade the economy itself. This leads to a massive repricing of oil and other commodities.
King Dollar
A lot of traders out there are about to learn something new: the US dollar can and fact will rise in value over the long-term, while pushing up US-based assets. For the longest time, we have seen people sell the US dollar, and by US-based assets and commodities. While the stock markets will more than likely do fairly well, commodity markets could take a real shellacking going forward. That being the case, I fully expect to see this market heads back down towards the 92 points or zero dollars level, which was the bottom of the previous consolidation area.
However, as the market lost almost 4% of its value, this is a move that cannot be ignored. I believe that there will be an attempt to rally this market, and on that attempt I am more than willing to get aggressively short of this market. Simply put, this has been a long time coming.
