"Refineries are loading up barges and tankers and just having them sit full of crude oil," said Darin Newsom, a senior analyst at DTN, a market-information service.
asr: the Feb-March-APR spread shown are as of Jan 15 th early hours (EST )
"This is an indication of just how bearish this market actually is."
The tight storage situation caused February crude to end at a $US6.91 discount to March, the third-largest such deficit ever. Traders expect the gap to continue to widen as the February contract enters its final week of trading, and note that the March-April spread also has expanded to $US4.09.
"Seven dollars is ludicrous, $US4 is astronomical, and April-May at $US2.50 is extremely wide," said Peter Donovan, vice-president of Vantage Trading in New York. "It doesn't go on forever though. At some point you're going to see the supply side start to tighten up a bit."
Eventually, production cuts by the Organisation of Petroleum Exporting Countries or other producers will bring supply in line with weakened demand, causing some of those full storage tanks to empty out, Mr Donovan said.
Thursday, January 15, 2009
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