Yep, that's right, supply went up, demand stayed the same, and the price somehow increased. I know, you say, perhaps it's because of a weakening dollar, a la my post from Monday. Actually, as it turns out, the dollar went up yesterday, and started this morning off more or less sideways (depending on which currencie[s] you're using as a dollar barometer). So if anything, all else being equal, I would have expected the price of oil to come DOWN because of the dollar's upward motion.
Truth be told, oil only jumped something like 1.7%, and weird price movements aren't anything new, but what strikes me as bizarre is how absolutely backwards this is. Typically, announcements of these sorts cause commodities traders to freak out, but usually its in the (supposed) correct price direction. For example, in the spring and summer you'll often hear about weather services predicting the possibility of a rough hurricane season, and suddenly the price of November Orange Juice will go up 40%. In a way, this is a self fulfilling prophecy; traders are trading on the idea that other traders will be trading on the idea of an orange shortage and voilá, your price correction is over-amplified, but in the correct direction. Call it being overcautious. But to have prices move against what is just very basic economic supply and demand, with seemingly no other cause in sight, really leaves me scratching my head. Let's wait and see how this plays out.
Full Disclosure: Short March 2010 Mini Crude Oil (QMH10) as of writing.
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