GS see downward pressure on the spot, June, CL WTI contract in coming weeks due to:
- (1) the potential exit of spooked long retail investors given the violence of (Tuesday's) move (and the negative carry incurred at each contract roll),
- (2) the negative impact of investors rolling their long positions from the June to the July contract in early May (the USO rolls on May 5-8),
- and ultimately (3) the still unresolved market surplus that will hit binding storage capacity in coming weeks.
A violent rebalancing. As storage becomes saturated, price volatility will remain exceptionally high in coming weeks. But with ultimately a finite amount of storage left to fill, production will soon need to fall sizeably to bring the market into balance, finally setting the stage for higher prices once demand gradual recovers. This inflection will play out in a matter of weeks, not months, with the market likely forced to balance before June.
Bolding above is mine
Note Adam's latest is here ICYMI (do NOT miss Adam's oil posts)
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A heads up for a couple of key dates ahead:
- roll of June to the July contract in early May (the USO rolls on May 5-8) - this noted above by GS
- June contract expiration on May 19
