This is not rocket science. Three weeks ago in "Story of the day: "Oil slides after supply build, could see $82"" your humble (with much to be humble about) blogger said:
The near futures are at $87.87, down $4.02.Errrmmm, yes.
There's a lot of oil around....
From the Wall Street Journal:
Supply Boom Upends the Oil Market
Only a few months ago, traders and investors were fretting about a shortage of crude oil. Now, many are worried there may be too much.Ya think?
Suddenly, the world is awash in oil.
Only a few months ago, traders and investors were fretting about whether tensions in the Middle East and production problems elsewhere would lead to a shortage of crude oil. Now, many are worried there may be too much.
Forecasters say that in the fourth quarter, global oil output will top demand by more than 630,000 barrels a day, the biggest surplus in four years. The jump is due to a confluence of events: Turmoil in the Middle East has subsided along with the production and transportation problems that had been stifling oil flows from the U.S., North Sea and Africa. Meanwhile, Saudi Arabia is pumping more oil to replace falling Iranian exports, keeping output from the Organization of the Petroleum Exporting Countries steady.
That is causing some investors and traders to change their view on the direction of prices. Already, Brent crude, the benchmark in Europe, is down 7.8% from a three-month high in August. U.S. crude prices are down 13% from a mid-September peak.
Crude-oil prices have been particularly vulnerable to worries about the global economy that have recently seized financial markets. Many investors and traders say that with growth in many major oil-consuming countries still sluggish, demand isn't going to be strong enough to absorb all the extra supply.
A sustained decline in crude-oil prices should lead cheaper gasoline and diesel products used by consumers and businesses, they add.
"There's plenty of oil out there now," said Tariq Zahir, head of Tyche Capital Advisors, a $4 million commodity-trading advisor. He has wagered that rising supplies will push prices lower.
Over the past month, hedge funds and other money managers cut by 23% their bullish bets on crude-oil futures and options on the New York Mercantile Exchange.
On Wednesday, oil prices fell following a report from the U.S. Energy Department that showed domestic stockpiles rose last week to the highest level since July. Crude for December delivery fell $0.94, or 1.08%, to $85.73 a barrel on the Nymex. Brent crude on the ICE Futures U.S. exchange closed down 40 cents, or 0.37%, at $107.85 a barrel.
Goldman Sachs Group Inc. last week cut its 2013 price forecast for Brent crude to $110 a barrel from $130. The bank's analysts said additional barrels are set to weigh on prices as new transportation networks relieve bottlenecks in the U.S.
The outlook for rising oil supplies extinguished a rally in September that was driven by hopes that Federal Reserve stimulus efforts would bolster oil prices. Past stimulus efforts have resulted in a weakening dollar, which tends to lift prices....MORE
Previously:
Oct. 18
Goldman Calls Time On the Oil Bull Market"
Oct. 19
Goldman Sachs on Oil Prices to 2016 with Breakeven Prices For the Top 360 Projects
There is a lot of oil above-ground....
In the words of analyst (and engineer) Montgomery "Scotty" Scott:
We're going down, Captain.
