Oil prices have been locked in the current price range for months now, with price volatility dropping drastically. It seemed that only inventory reports, OPEC’s compliance rate, and the re-opening of various European countries such as Spain and Italy could trigger price movement. But the current price cannot be justified if we refer to fundamentals alone. It is clear that the draws from inventories that we are seeing aren’t driven by genuine demand. China’s buying spree appears to be slowing down in September after the country has stocked up on cheap crude during the summer months. Source: https://www.macrotrends.net/2480/brent-crude-oil-prices-10-year-daily-chart The recent optimism in the markets is an example of the phenomenon Andrei Shleifer and Nicola Gennaioli outline in their book, A Crisis of Beliefs, in which good news is over-represented while tail risks are largely ignored. Then, when those tail risks surface, there is a crisis or a crash. We […]