BrotherMaynard

Trend Reversal in Oil

This is the fourth month in a row that oil is doing its head-fake. CL front month is caught in a feedback loop. The lack of storage capacity is at the heart of it. As expiry rolls around the front month contract sells off as nobody can take delivery (Cushing is full). The next month contracts get bought up on the roll and pop back to the fourties. Oil can't go any higher, otherwise everybody that has been storing oil will dump it, pushing prices back down. Its going to take a genuine demand upturn to eliminate the massive overhang of excess oil and break this loop (alternatively, the CFTC could actually enforce position limits on the USO wich holds some 60k contracts...the main offendor when it comes to distorting the roll)