The West Texas Intermediate Crude Oil market has drifted a bit lower during the trading session, but not without buying pressure at various points in the day. The Thursday session saw the market close a little bit lower, but it looks as if it is trying to stabilize after that massive 12% drop during the previous session. That being said, this is a market that desperately needed this type of pullback, so I think it is actually a bullish thing by the time it is all said and done.
You should keep in mind that demand for crude oil is still going to pick up, although there has recently been a statement by the UAE that they would consider increasing crude oil output. For what it is worth, it should be noted that the Saudi Arabia delegation was not even taking phone calls from Joe Biden. In other words, I think it is only a matter of time before the buyers come back but quite frankly, we had gotten so far ahead of ourselves that a massive correction had to happen sooner or later.
The $100 level underneath should be supported, and I think that is basically where you define the overall trend. As long as we can stay above $100 a barrel, it is likely that the markets will continue to find buyers, and therefore dips should be thought of as a potential value play. Granted, that was a very nasty fall during the Wednesday session, but that does not necessarily mean that the trend is over. Oil will continue to be volatile, especially considering that part of what is driving it at the moment is a war in Ukraine.
As the market starts to think about the global reopening trade, it has to think about oil. I do believe that given enough time oil will be bullish, but that does not mean that we will get the occasional selloff as we have just seen. This is especially true when it gets to be parabolic so do not be surprised at all by this move.
Keep in mind that a lot of levered funds probably just got blown out, so they will be a bit hesitant to get involved. However, the longer that we stabilized with more normal volatility, the more likely it is the bigger money can flow into the markets and start buying again.