Brent crude has reached US$ 74 a barrel because of lowered refinery use and a backup in crude inventories that has left many a super tanker waiting to unload.
Why would an oversupply result in crude prices going up?
I think he meant "despite"
Good question. I have no clue.
I think the market is anticipating a shortage due to an Iranian War - something that is inevitable, failing a popular revolution - which is unlikely to succeed without our active involvement.
When was the last time you filled up your car at the local refinery?
Because they are not keeping up the same income levels. Charge more to make up for what you are not getting. Remember a few years ago when the gasoline usage dropped over several months because of high prices -- less fuel usage threatens their profit projections, regardless of fuel availability.
That theory is spot on when prices are rising. But I, and I'd bet one or two other people, notice that the theory breaks
down somewhat, when replacement costs go down...
Guess those pricing people don't understand the art of pricing. Then again, maybe they do.
"...Why would an oversupply result in crude prices going up?..."
Price gouging by those involved.
There's actually a combination of factors:
a) the war-with-Iran risk premium;
b)the switch to ethanol and spring to summer refining gasoline 'blend' changes (massive waste of oil and lowers gas mileage to boot, but makes the air look cleaner to the unemployed);
c) speculation
Buying commodities to 'hedge' against a financial meltdown is like getting a hairdo to protect you from a gunshot to the head: commodity prices fall faster and further than anything else when there is an economic downtourn.
It wouldn't, but the market doesn't exist in a time vacuum. The market is looking into the future. Oil is rising because people are buying up that surplus. Think Iran.
Another way to look at this is a Hurricane. It is due to arrive Sunday, so why are all the store shelves emptying out on Thursday? There's not really a food shortage. In fact everyone's pantries are fuller than normal.
Iran is driving this market.
Why would an oversupply result in crude prices going up?
It use to be called GREED and that will contribute to the demise of man.