This is really a Benjamin Button oil market. Reliving its twenties already, it now faces the decidedly awkward prospect of heading back into its teens.
U.S. crude climbed above $27 in Ny after touching $26.13.?The energy minister from the United Arab Emirates said OPEC may cooperate to curb output, according to the WSJ.
U.S. oil prices fell for a sixth straight next day of market intelligence firm Genscape reported the Cushing, Oklahoma delivery hub for futures saw a build of just about 425,000 barrels in the week to Feb. 9.
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Here are three charts showing why oil bulls might soon regard that like a good price.
The big thing weighing on oil is the amount of it sitting in storage tanks. Keep the eyes on storage tanks around Cushing, Oklahoma. It’s a pipeline hub which can serve as the physical reference point for that Nymex crude oil contract. At this time, Cushing’s tanks appear to be brimming.
When land-based storage reaches capacity, thoughts turn to storing oil on the ocean. But storage at sea is pricey and thus causes spot prices for oil to trade at a wider discount to futures to compensate for that added expense. Now take a look at the spread between your spot price and the sixth-month contract:
Part of the reason more oil is heading into storage is that refiners aren’t processing as much as they were. There’s a seasonal effect at play, but also a fiscal rationale. A study on Wednesday that Valero was throttling back at its Memphis refinery because too much gasoline was accumulating spooked the market. Why must refiners process so much crude oil when margins look this?:
To remedy this situation, refiners need to negotiate lower prices for his or her main raw material: crude oil. That shouldn’t be too hard with space for storage drained and producers seeking a house for excess barrels. Oil prices beginning with a “1” could be around soon.
Bloomberg.com
