Headline Writers At It Again

Here's the headline: "Oil Could Drop to $87 In the Near-Term"

Read the article at the link and decide for yourself if that's the take-home message.

This was the concluding paragraph in the article:

The current retreat [in the price of oil] is an aberration in the fundamentals of demand and supply. The price chart shows the constraints of this policy. A return to the usual demand and supply relationships restores the price activity to its previous behavior and this points the way to a resumption of the uptrend. [Note: on the day this article appeared, WTI oil was up $2.00 from $91 to $93, or thereabouts.]

Elsewhere in the article, the writer says:

The downside target is the long-term support level near $87/barrel. If this fall was triggered by changes in the fundamentals of demand and supply then the chart would also suggest a further downside target near $77/barrel. This is a low probability target simply because the new supply of oil is limited by the size of the stockpiles and the political will power of the IEA member nations.

This is very different from OPEC intervention in the market where their virtually ‘unlimited’ supply allows for the almost infinite increase in production to meet the demand and supply balance. IEA increases in supply are limited by the very nature of the stockpile. This suggests string support around $87/barrel with the development of a consolidation pattern.

I agree with everything in the article (in a general way) except the statement (written as fact) that OPEC has an "unlimited supply [that allows] for the almost infinite increase in production to meet the demand and supply balance." But in the aggregate, a nice analysis. 

But even so, the writer of the linked article and I probably agree on OPEC supply as generally defined and understood, but my definition is a practical one; the writer's definition is no doubt a "theoretical" one.