If you look around markets today, you wouldn't expect to see a $2 fall in oil prices. Stock futures are up 0.3% and the Australian dollar is leading the way in light FX trading.
Yet WTI crude is struggling, down $2 and within striking range of last week's lows.
What's going on?
It's tough to find a catalyst behind the selling. Certainly, the market has been disappointed by the reaction to the Saudi production cut and there could be some bulls throwing in the towel. That wouldn't necessarily need to unfold today though, given the backdrop.
There is some talk of another large build in US inventories this week due to low US exports, so that could be the driver. There's been a muddy pattern of oil weakness early in the week and strength to close it.
Otherwise, I have to look at the latest Goldman Sachs call, with them now seeing December brent at $86 vs $95 previously. Are people really selling on a Goldman Sachs call though? If anything, Goldman has been notoriously bullish on oil and now you have them throwing in the towel (to some extent). If anything, that's a bullish indicator.
Moreover, the axis of demand that matters most for oil this year is China. Today in the China Securities Daily, they highlight the likelihood of a cut in the MLF rate this week and the LPR next week.
