07 January 2009

Growth in speculative stocks of crude destined to keep prices low

This Bloomberg story, about the growing demand for oil tankers to be used as storage by speculators hoping for higher crude prices, illustrates quite graphically why oil prices are set to fall even more. The massive buildup of inventory will eventually have to come back on the market, and will inevitably drive prices even lower.

It speaks volumes that oil prices have continued to decline in recent months EVEN as traders have been squirreling away vast quantities of the black stuff away into the bellies of ships plying the world's ocean lanes to nowhere. If prices are falling even with 50 million barrels taken off the market, then demand destruction must be awesome indeed.

No comments:

Post a Comment