For the past month, the price of oil has soared by a 50% on no fundamental catalyst; in fact, the “fundamental” situation has gotten progressively worse with the record oil inventory glut increasing by the day even as US crude oil production posted a modest rebound in the past week after two months of declines, while the much touted OPEC/non-OPEC oil production freeze has yet to be discussed, let alone implemented.
With or without a valid catalyst, however, the short squeeze price action has drastically changed not only investor psychology, but that of the IEA as well, which on Friday announced that oil may have bottomed (if the agency’s predictive track record is any indication, oil is about to crash).
But while traders, algos and CNBC guest “commodity experts” may be certain that oil will never drop to $27 again, someone else is not at all convinced that oil prices will not drop again: oil producers themselves.
We first noted this earlier this week, since January, the spread between Brent for delivery on the 2020 end of the curve and crude for prompt supply has dropped by nearly $8 to around $10.71 a barrel. “Brent’s flattening contango since January comes as many producers want to cash in immediately on recent price rises. They’ve been heavily selling 2017/2018 and beyond, and it shows that they don’t quite trust the higher spot prices yet,” said one crude futures trader.
This post was published at Zero Hedge on 03/12/2016.
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