Oil prices have moved into ‘super contango’
By John Kilduff
12 hours ago
Nick Oxford | Reuters.
Volatility in the oil markets continue, with prices set to plunge over
the holidays, says John Kilduff. Here's why crude could fall to $30 a
barrel.
It looks to be a volatile final few weeks for crude oil prices. So far, the low for WTI oil prices (WTI) in 2015 of $37.75 a barrel set in August stands as the low price point -- but not for long.
There is a
global supply glut, not just of crude oil, but, increasingly, refined
products that will likely break the back of price support in the market,
sending oil prices into a holiday plunge. So much so, land based
storage tanks are filling up and increasing numbers of volumes are being
stored on tankers.
In a recent report, the International Energy Agency highlighted the fact
that global inventories of all petroleum products were at 3 billion
barrels, which was a record. And just over 2 billion of those barrels
are resident here in the U.S.
Read More Contango explained
Each week, in the summary page of its petroleum-status report, the
U.S. Energy Information Administration references the fact that U.S.
crude-oil inventories are at levels not seen in over 80 years.
Inventories of gasoline are well-above their average and diesel fuels
are also well-supplied.
The vast crude oil glut or mega-glut is manifest in the West Texas Intermediate (WTXR) and Brent crude
oil price curves, which have moved into a "super-contango." (Yup, there
are lots of superlatives needed to describe the current state of the
market.) 
-
Oil rig count falls
Business Insider 10 hrs ago
-
One of the most depressing economic stories of the past year is finally over
Business Insider 11 hrs ago
The difference between Brent crude-oil contracts, one year apart,
recently hit a record $8 a barrel. The January 2016 WTI futures contract
is trading at a hefty discount of $1.50 per barrel to the February
contract. In tightly-supplied markets, when crude oil prices are strong,
that spread value is the complete opposite.
Oil prices have gotten some support this week from the heightened military action and worry over the situation in Syria and Northern Iraq , especially with the downing of the Russian fighter jet by Turkey . How Russia
responds could plunge the region into deeper turmoil, putting a great
deal of oil infrastructure and supply in the cross hairs. But these
fears simply do not haunt the market for very long last these days.
The market also got a taste of Saudi Arabia 's
power this week, when a flip comment by the Saudi oil minister at a
cabinet meeting was taken to signal a change in production policy by the
Kingdom, as a way of "cooperating" with the other OPEC and non-OPEC producers. With the OPEC meeting looming next week, the comments were seized upon.
The reality is that nothing will come of the OPEC meeting. The Saudis
are set to hold their ground. They see little to gain in assisting their
oil market and regional rivals, Russia and Iran , by helping to "stabilize" the oil markets. In fact, the Saudis don't see a market that needs stabilizing. The lone bright spot for the oil market has been the strong demand for gasoline. The demand in October in the U.S. was the highest in eight years. But, once the holidays pass, that demand will drop off, too.
The downward pressure remains intense on the petroleum complex from
the mega-glut and the hit to demand from the economic softness in China
and Europe. The strengthening dollar is also a negative for prices.
U.S. motorists will be filled with glee this holiday season, as they
buy sub-$2.00 per gallon gasoline, courtesy of $30 crude oil.
Commentary
by John Kilduff, a partner at Again Capital, an investment-management
firm that specializes in commodities. Follow him on Twitter @KilduffReport.
end quote from:
Oil prices have moved into ‘super contango’
Volatility
in the oil markets continue, with prices set to plunge over the
holidays, says John Kilduff. Here's why crude could fall to $30 a
barrel.
CNBC
No comments:
Post a Comment