Nothing says more about the changing nature of the crude oil market than its action on Wednesday, when two normally bullish developments failed to ignite a rally.
First, OPEC announced that it would trim production by half a million barrels a day to prevent oversupply. Then, the Energy Information Administration announced that crude oil inventories last week fell 5.9 million barrels – a bigger drop than expected even as the EIA lowered its world oil demand forecast slightly.
But how did the price of oil react? During its bullish phase, early in the summer, these back-to-back developments would likely have sent it on a tear. Not this time though: Oil traded at $102.58 (U.S.) a barrel in New York, down 68 cents. Perhaps OPEC's production cuts - even in the face of falling inventories - are a sign that perhaps the world's oil needs are easily met after all. Curiously, could production cuts actually be bearish for the price of oil?
