The Oil Market Is A 'Complex Thing To Trade'

Benzinga's own Garrett Cook was a guest on Benzinga's PreMarket Prep daily show on August 24 to talk about the oil market.

Cook was invited to discuss his in-depth knowledge of the oil market and to offer his expertise at a time when the commodity was showing erratic trading characteristics.

On August 23, the price of oil surged following reports that Iran's government is now open to an agreement that would cap its oil output.

Cook noted that he hasn't seen any official documentation on Iran's intention, which was reported by various media sources and was simply "chatter" that "some guys were throwing around."

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"The oil market is an interesting place," he continued. "It's a complex thing to trade."

Cook did acknowledge that "talk is a major thing in the oil markets," especially at a time when the fundamental story behind oil hasn't really changed since February.

For instance, the price of oil surged ahead of the Doha, Qatar, OPEC conference earlier this year on rumors of an agreement among member nations to limit output. Once the meeting passed with no agreement met, the "oil market started to correct again."

The price of oil dipped from around the $50 per barrel level to near-$40 per barrel, but then suddenly reversed course and started crawling back higher to the $50 level.

Cook suggested the "un-sourced OPEC rumor" involving Iran's commitment toward an agreement led to the quick turnaround in oil's price, even though the reports "can't be sourced" and "can't be documented."

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Meanwhile, rig data is showing new rigs coming online and tanker data and new supply of oil from Canada are coming back online following a massive fire near the oilfields support the case against a rise in the commodity's price.

Bottom line, Cook pointed out the oil market is indeed "going through a correction," as major producers don't want to cut back on production out of fear of losing market share, but it won't be surprising to continue hearing unverified rumors throughout the end of the year to keep the price of oil higher.

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