Posted on 11/13/2015 7:58:18 AM PST by thackney
Crude oil prices sold off heavily on Wednesday and Thursday, with front-month Brent futures falling more than 7 percent to the lowest level more two and half months.
Prices slumped amid growing concerns about continued oversupply in the market, the build up of inventories and the possibility of storage space running on land and forcing more oil to be stored expensively at sea.
The American Petroleum Institute reported on Tuesday that crude oil stocks in the United States rose by an unusually large 6.3 million barrels last week.
The Energy Information Administration confirmed on Thursday a build of 4.2 million barrels with inventories now 109 million barrels above the prior-year level.
There was plenty of other bearish fundamental news around, with OPEC predicting the oil market would remain oversupplied in 2016.
But prices have also been influenced by more technical factors, among them the expiry of the December Brent futures contract today which tends to reduce liquidity and exaggerate price movements.
WATCH THE SPREADS
The most interesting prices moves were not in spot prices but in the differences or spreads between futures contracts expiring on different dates (http://tmsnrt.rs/1N1eOd1).
The entire strip of futures prices for the next six months has been weakening over the past four weeks as the market focus swings back from strong oil demand towards continued oversupply.
Softness in the spreads for both WTI and Brent futures contracts has been especially pronounced over the last 10 days.
(Excerpt) Read more at en-maktoob.news.yahoo.com ...
WTI and Brent spreads over year-end
http://fingfx.thomsonreuters.com/gfx/ce/1/88/88/DECEMBER%20JANUARY%20SPREADS.pdf
3 billion barrel glut
Peak storage!
There are about 50 oil tankers anchored off the Galveston coast because there is no place to offload it right now. Some of those tankers have oil that hasn’t even been sold, yet.
Combine that with refiners wanting to lower inventories for tax purposes at the end of the year, nothing is going to change soon.
Contango is driving the oil in storage and tankers.
There is more money to be made at this time selling to a future contract than for immediate delivery.
http://quotes.wsj.com/futures/CRUDE%20OIL%20-%20ELECTRONIC?mod=mdc_cmd_dtabnk
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