On June 2, OPEC reached a decision to extend oil production cuts into the next year.
The mainstream logic that follows is this:
Oil supply down; oil prices up.
Yet hours after the announcement, crude prices tanked. What happened?
Robert Prechter’s Socionomic Theory of Finance explains that oil prices are driven not by the governments or oil producers but by the collective mood of the energy market participants.
In fact, Prechter dedicated an entire chapter to explain why headline-worthy market fundamentals failed to produce the result expected by the mainstream.
Here’s the real-time explanation behind crude’s “unexpected” drop on June 3:
A few days earlier, on May 29, EWI’s Energy Pro Service editor Steven Craig told subscribers:
“Bottom Line: It’s aggressive, but a bearish stance against 80.62 seems warranted. Crude needs to extend the decline from the 80.62 overnight high in an impulsive manner to advance the notion that wave 2 has ended.”
And here’s what happened:
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