By Barani Krishnan

Investing.com – Just 24 hours after the biggest selloff in oil since early October, the bulls were back to buy crude lows and bring US crude to a higher settlement on Thursday.

Brent closed lower for a second straight day. But with another day before the end of the week, it wouldn’t be surprising if the losses accumulated since Tuesday in WTI and Brent were completely erased and the market posted a tenth straight week of gains.

Thursday’s recovery from the lows of the session was helped by two things.

The first was the realization by oil bulls that the three-year low in crude inventories at the Cushing, Oklahoma storage facility was a better play on market psychology than any possibility that Iranian nuclear inspectors and Westerners reach the negotiating table after November with an agreement that could lift sanctions on Tehran’s crude exports.

The second was the magic mantra that OPEC + never fails to use before the start of each monthly meeting: this offer will be even shorter in the coming month or quarter.

And just in time, a headline shouted Thursday as the so-called Joint Technical Committee of the Oil Production Cartel convened for a meeting: “OPEC + SEES MORE CLOSED 4T OIL MARKET IN PRELIMINARY DATA – DELEGATE ”. The larger cartel itself, led by OPEC + oil ministers, meets on November 4.

Unsurprisingly, US West Texas Intermediate crude gained 15 cents, or 0.2%, to $ 82.81 a barrel. WTI hit a low of $ 80.67 two weeks earlier in the session. On Monday, it fell 2% for its biggest loss in three weeks.

Brent, the world’s oil benchmark, traded in London, ended the session down 26 cents, or 0.3%, at $ 84.32. Brent hit a three-week low at $ 81.62 earlier in the session, after also losing 2% on Wednesday.

“The rally has been looking crowded for some time now, so the correction we have seen is not a big surprise,” said Craig Erlam, analyst at online trading platform OANDA. “The question is, is this it?” It’s interesting how quickly traders bought the downside.

The story continues

Crude prices fell on Wednesday as Iran’s possibility of holding nuclear talks with Western powers returned to the headlines, amid Tehran’s attempt to break free from US sanctions banning the sale of its oil to the world.

A weekly increase in U.S. crude inventories also weighed on the market, as the EIA, or Energy Information Administration, reported inventory levels double market expectations. The rise came as refiners boosted crude oil imports last week to make more products like gasoline and diesel, while crude exporters shipped less.

To be fair, some of the negative factors in oil never had the promise of lasting long enough to bring about a significant correction in crude prices.

For example, Iran’s hardline regime under President Ebrahim Raisi has consistently reversed Western efforts to rule over the Islamic Republic’s nuclear program.

And while U.S. crude inventories may have risen over the past week, inventories at the Cushing hub – a bigger measure at times for the market – have fallen an additional 4 million barrels, hitting lows since 2018. .

As a perspective, over the past 10 weeks, any 1% to 2% daily correction to WTI or Brent has often been reversed by a 4% to 5% rise by the end of the week.

While the current oil talk is extremely bullish, smaller positive developments are often amplified by those on the long side of trade to blow the rally out of proportion.

Of course, OPEC + is on a mission to help the oil narrative, whose mission is to ensure that global crude production remains at about one-fifth of immediate needs. In any ordinary market, this would be seen as a deliberate stifling of natural production to create an imbalanced market. But in OPEC terminology, it’s called “rebalancing”.

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