Traders unable to get rid of crude are selling at a huge discount as storage facilities fill up with unwanted oil and gas, said analyst Stephen Schork.
Those lucky enough to find unused storage facilities are holding their oil in hopes of cashing in on the higher March prices. But those prices could evaporate quickly, Schork said.
“Who the heck wants to buy right now?” Schork said. “If you’ve got barrels, you’re going to sit and wait and wait and wait.”
The uptick in February oil prices suggests there are still buyers out there who can either move crude or have found a rare storage facility. Still, Schork doesn’t expect industrial demand to perk up before the fourth quarter of 2009, and crude prices in March could suffer a worse fate than February, dropping below $30 a barrel, he said.
All those speculators who bought oil on the idea that it was going to go up forever are now getting wiped out. At first they were storing the oil hoping that it would go back up. But now they are running out of places to store the oil and and prices are still low.