The decline, although larger than anticipated, was not really news. The number of active rigs had been falling steadily for the previous seven weeks, so the trend was well understood. The size of the move was wholly unrelated to the significance of the information that triggered it. Instead, the rig news sparked a classic short-covering rally, as hedge funds with significant positions betting on a further price fall found themselves losing money as oil rose, and rushed to reduce their exposure, pushing prices up even more. “Is the falling U.S. oil rig count really driving an oil price turnaround?” analysts at Citigroup wondered in a research note of the same title published on Wednesday. Productivity gains and more careful selection of drilling targets will reduce the impact of rig cuts, they predicted. But markets are not precision weighing machines. They are voting machines – subject to whims, crazes and […]