Since May oil traded -$40 on April 20th, there seems to be a step up in media attention on the lack of oil storage, the flotilla Saudi oil headed to the US and how we are drowning in oil… Yesterday, I posted such an article on our blog… However, when one looks at the actual spreads we see a different story… June/July has rallied sharply since making a low on Tuesday, April 21st (note the low in June/July was made a day after the -$40 print in May futures… US Oil rolled out of about 50,000 June longs on the 21st)… Also, this week, we have seen mostly net liquidation in spread option puts… Recall that on April 20th, close to 65,000 May/June puts expired deep in the money… Have the fundamentals changed? Are producers cutting back faster than expected? Has a the collapse in demand bottomed out? Or is this a technical reaction to an over sold spread market (long only strategies are already out of June?)? Of course, -$3 is still an incentive to store barrels…
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