alt Hacker NewsEveryone’s talking about an oil price spike if stocks are depleted, but the heavy backwardation of crude oil futures tells a completely different story. Who is right? Are crude oil traders, who I’m sure know exactly how much remains in reserve, on Chinese fentanyl, or is something else going on?
There was a press release by Exxon a couple of days ago with claims of prices hitting 150.
People have been making similar claims for months, but it hasn’t happened. The forward curve has been backwardated for quite a while now.
Is it Exxon doing a please buy our oil while it’s high, or is something else going on? Pray tell.
Replies
I would listen to commodity traders before politicians or anyone.
Strategic stocks will get depleted - demand will remain high whether the strait opens up or not due to so much pent up demand.
It's possible that oil traders are still trading on the assumption that the war will be over Soon™, in which case the expectation is that we won't hit the bottom of our stockpiles and thus there'd be no reason to price in that eventuality. I don't know if I agree with that, and I would certainly be surprised if traders generally thought as much -- but who knows!
There are other possibilities.
- This is a situation they’ve never faced before. It’s hard to simulate and betting on high prices may not be a great bet. Especially given that oil futures aren’t like buying options. You actually have to take delivery.
- They’re expecting a recession.
- They don’t want to invest the money In aggregate that they’d have to in futures to raise the price above certain levels.
- They suspect a lot of oil consumers will simply shut shop and end demand since those prices won’t be sustainable for many businesses. Airlines are already canceling flights.
- They expect the blockades to end sooner rather than later.