In certain circles I have been reading about the weeping and gnashing of teeth that some are going through because there is so much excess crude in the storage tanks of Cushing Oklahoma. Why, they scream is crude playing around with $74 bbl??
I think there are a few things at work here.
1. Speculators. The big specs are holding 5x more paper barrels than the real wet barrels are in storage at present. Net length in WTI has not been this high since just before last summer's crude rally.
2. Worldwide supply demand imbalance. Pour through the numbers and it's not long before you realize that on a worldwide basis demand is up 1 mln bbl/d from last year while output is down by 1 mln bbl/d.
Each day the OPECers delay in lifting output simply means more upside pressure. We'lll be looking at $90+ crude this fall if things don't change soon on the production front, or a quick $10 decline if output is lifted, but with ongoing strong world demand, even a drop on OPEC increase probably will not last for long.