Oil Traders' Invisible Hand

Perceptions matter much more to the price of of oil than supply and demand.

Investors aren't part of the reality-based community.

David McNew/Getty Images

Bank analysts are predicting the oil rally of recent weeks isn't going to last. It's important, though, to reflect on why the rally happened in the first place. It was never about supply and demand as such, but about the market's perception of where they were going. If oil prices head south again, that, too, will be a result of guesswork. Traders should know there is an element of self-fulfilling prophecy -- for the long term, as well as the short term -- in their pronouncements about today's oil market.

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