Tyler Durden on 03/23/2016
One month ago, just as Cushing storage was rapidly approaching its operational capacity,we warned that Cushing (and increasingly all parts of PADD 2) is denying storage requests … hinting that it was just a matter of time before excess production would be shifted to other regions, most notably the Gulf Coast, or PADD 3.
In the intervening month … the excess supply situation in the US is getting worse by the day, (but) not even we expected the dour picture painted by some key industry participants. … Ian Taylor, chief executive of top oil trader Vitol, said on Tuesday that “stocks of crude and products continue to build and these will weigh upon the market.” …
(Gasoline and diesel/heating fuel are in a similar situation.)
… with every passing week in which nothing changes in the fundamental supply/demand picture, the most likely outcome will be a violent inventory liquidation over the next few weeks, one which will be accompanied by a substantial plunge in oil prices resulting from wholesale dumping as producers rush to sell product to anyone who will buy it. (And this will I suppose lead to a wave of credit downgrades on oil producers and defaults, driving high-yield bonds down.)