I think most of the media stories about oil are total BS...
What we saw in oil today... was the futures market working the way it should.
I've been posting about that here... saying it doesn't matter that Russians and Saudi's don't agree... because they don't matter either... Reality is DEMAND has fallen for known reasons... its not a surprise... and no amount of wishful thinking will make people want to use more oil than they are right now. Without the ability to consume what's being produced... production cuts MUST AND WILL occur... whether anyone "agrees" to make those cuts or not.
Because, when the tanks are full... the tanks are full. Period. Stop.
Those saying that this event was all and only about the technical issues in the market related to the May contract expiry... are wrong.
Tomorrow, there will be no May contracts being actively traded in futures markets. And, tomorrow, the tanks will still be full. So, if you think prices should be rising, now, because of the new contract focus... Why would they ? We already have all the oil we can use, PLUS all the oil we can store... and there's no where left to put any thing more, there is still a surplus, AND too much additional oil still being produced... ?
The futures market functions... are STILL having a hard time digesting the May contracts ? There's no market for it... no demand for the stuff from people who expected to use it... and now as more is produced, there's just nowhere left to put it...
Nothing in that gives any reason for anyone to pay more for a June contract... for oil that also has no users and no place left to put it ?
But, what will happen from here... when the best price producers can win for delivering what they produce is a NEGATIVE price... is that the market will now impose more rigor in a discipline applied through the price mechanism, which discipline the producers have been unwilling to impose on themselves...
You might see more stable trading... in a market that's not facing down a deadline the way the market was in trading yesterday...?
But the market fundamentals have not changed a whit from yesterday...
Too much oil.... nowhere to put it all...
As production is shut in... the growth rate in the already massive overhang in surplus supply will begin to be reduced...
And then, perhaps, demand will increase enough in June to make more of a difference ?
But, given the data we have now... without evidence that production has been throttled back substantively enough to shrink the surplus in storage... or the demand for storage... expect to see the same thing occur BEFORE May 20th as we saw happen on April 20th...
But, there's fundamentals... and there's trading... ?
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