You can blame speculative overshoot for the unfolding scenario though the overall outlook remains bullish.

According to Standard Chartered commodity analysts, the correction tells us more about market positioning and the effect of extreme volatility than it does about changes in fundamentals over the past week.

The increase in volatility across financial and commodity markets has led to a sharp rise in the level of risk held by traders, and an associated incentive to close out some positions to lower the risk. Oil traders have mostly been positioned with a highly bullish bias in terms of both outright positions and spreads in recent weeks, meaning optimization in a higher-risk environment has mostly involved closing out prompt longs. With speculative shorts being very thin on the ground currently, there have been few natural buyers, and the downside has quickly opened up. While the price ranges involved have been rather extreme, recent price dynamics bear all the hallmarks of a textbook speculative overshoot followed by the correction necessary to reset extreme positioning.

The irony of the situation is that the dominance among oil traders of the belief that prices could only move higher has led to a position from which market dynamics dictated that in the short term, prices could only go lower.