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WTI New Low

|Includes: The United States Oil ETF, LP (USO)

I think next 1-2 months could be very risky for oil as US storage looks like will be fully filled up.

My rationale is below.

1) As per EIA, US crude oil storage capacity is 521 mio bbls (ex SPR) as of Sep 2014. 148 mio at refineries and 373 at crude tank farms including Cushing. That's the latest data available.

2) Current US oil inventory ex SPR is 434 mio bbls (as of 20 feb) implying only abt. 87 mio bbls of spare storage left.

3) Last 6 weeks avg of change is US oil inventory is +7.7 mio per week. At this rate oil storage would be filled up in about 11 weeks (abt 2.5 months ie early May)

4) Next 1 month weakest period for oil demand in US as refineries go on maintenance. Chart below is Oil demand from US refiners showing Feb-March is the weakest demand period.

5) US oil inventories historically only starts to fall from late May (approx 3months left from 20 Feb). Historically the rate of build is quite stable in this period .As highlighted from 3) in abt 2.5 months storage will be full at current rate.

6) Add to this, still growing US oil production. EIA data shows production growth in Mar in all 3 major oil producing shale basins. Looking at the trend production will grow in April as well. May could be the turning point.

Put all this together, there is good probability that US oil storage will be filled in the next 2+ months. That means

-WTI makes a new low

-WTI curve goes super contango much steeper than level seen earlier this year

-Brent-WTI spread blows out in favor of Brent