Three Triggers That Will Send Oil Crashing Again

Tuesday, March 24, 2015
By Paul Martin

By Charles Kennedy
OilPrice.com
Tue, 24 March 2015

Oil prices bounced back on March 24 on a sliding U.S. Dollar, but the pain may not be over yet.

Oil storage capacity continues to deplete. Storage levels at Cushing, Oklahoma, home to the crucial WTI benchmark, are at record levels. As of March 13, Cushing oil inventories hit 54.4 million barrels, the highest ever, according to the Energy Information Administration. That means that Cushing’s storage is now 77 percent full, up from just 27 percent in October 2014. The glut of oil has led to a flood of crude being diverted into storage tanks. As storage nears capacity, it becomes more likely that prices could drop significantly below current levels. That, of course, depends on if drillers cut back production enough to slow the storage build.

Yet another reason to suggest that oil prices could fall over the next two to three months is the annual planned maintenance that takes place at many U.S. refineries. Spring maintenance often leads to a significant volume of refining capacity temporarily closed down for several months. As that occurs, demand for domestic crude in the United States will decline, potentially pushing down prices. That also would force more output into storage, again exacerbating the shrinking ability for U.S. storage to handle more oil.

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