Greenshoot In Oil Market Or Overshoot?

Just when we thought things might not look as pretty as it is, we get a crazy run in crude oil prices first thing London morning. The way crack spreads and time spreads are behaving suggests that it is not consumers that are buying but specs. At the time of writing, we have flat price in WTI approaching $60 fast. This seems to be driven by a comment from IEA chief that the demand forecast is unlikely to be cut again from its already low level in the upcoming report(is this the green shoot in the oil market).

However, another comment seems to be ignored totally, i.e oil inventories are ‘a bit exaggerated’, Reuters quote. SFOT finds it hard to justify buying anything here other chart based breakout entry. He would guess that the layers of call at $60 (currently around 20k on exchange and who knows how many more OTC) might play a part in this game to expiry.

As noted yesterday, the level of inventories are still extremely high and there still appears to be a shortage in storage space. Higher flat price and stronger spreads might induce these inventories to finally come out of storage, but to who would they be sold to? Speculators and ‘index’ investors who have no interest in taking delivery?

SFOT does not think the spread strength will last and will look at selling a spread on strength but in the prompt. He maintains a short in CLZ0 in flat price exposure opened up beginning of the week as he does not like the nutty swing in front line for now.

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