So all seemed to be going well when I last checked the account on my lunch break, losses were getting smaller and we were on target to meet our objective of getting out with minimized losses. A few hours later and there is a completely different story. Oil tanks causing bids for JPY and CHF and taking our positions deep into the red. Thank god, i got back in time to cancel our GBPJPY buy.
But this puzzles me. You see even though OPEC did not cut production and the markets continued to be over supplied, the over supply is no greater than it was a month ago. It is not as if tomorrow there will be an addition 5 million barrels per day on the market. All producers are more or less at their maximum. In addition, with respect to Iran, it is true that they will be exporting soon, but they need months and billions invested to get the capability to export the amounts they are talking about. It will not happen over night…
So why the massive fall in oil prices? I think it is a combination of the following:
1.) Liquidity being tight this time of year, so even small volumes make a massive difference.
2.) Markets panicking.
3.) People being over bearish (remember the EURO in April?)
In all honesty if we look at this physical markets, supply is the same as it was one month ago. It is NOT greater. Demand is greater than thought (China and Japan have had greater growth than expected). I personally do not think that the price can fall much further and I think it will not be many days until we are back at 40 again. Just my thoughts. If I am wrong, then we have a massive loss to end the year on. Not exactly how I wanted to finish, but it is what it is. Sometimes, we just make mistakes and when we make them, we have to admit that we made them and learn from them.