The US EIA, Crude supply, Shipping, Contango (3)
With any product, but especially commodities, you have multiple scenarios; as those scenarios play out you can make money, lose money, or go no where ... it's supply AND demand AND speculation.
Possible scenarios (a few examples):
Supply Demand futures go up
(1) stable stable winter heating season
(2) stable stable summer driving
(3) falling stable OPEC cuts, conflicts
Futures go up due to the "expections" of increased demand, reduced supply, or both. The spot or cash market reflects what's right now. The current scenario facts are: demand is falling AND OPEC is cutting supply. Everyone is watching, but ignoring the OPEC cuts for right now as OPEC's cuts haven't yet caught with the drop in demand, hence the increase in supply, and this isn't in the US EIA report, there are 33 ships storing 60-80 million bbls of crude, leased for multiple months, that if these "contango players" weren't "in the game" crude would be at $20/bbl.
Unlike speculators, the "contango players" have a clear opportunity to take advantage of the difference between the cash price and the futures price. You buy the cash price, you sell the futures. Your profit, less storage and insurance, is the difference. If you're real good, you take more risk and roll the futures, month to month, against the stored crude and you can make even MORE money. The speculators, know demand is falling, the speculators also know OPEC is cutting supply, what the speculators don't know, the "catch the falling knife scenario", is when will the supply cuts catch up with the falling demand. When you see global reductions in inventory, the OPEC cuts will have caught up, and the speculators will jump in. We'll all be in trouble again ... trapped in a viscious circle.
I have no problem with the "contango players" they're actually doing all of us a favor by taking up some of the falling demand that could otherwise dropped crude to $20/ bbl. The $20/bbl crude would have done big damage to our IRAs, 401 Ks, and the global economy would be horrendous possibly taking YEARS to recover. Any thought of alternative, "green", good for the planet energy, and the companies in that industry, would be GONE.
I have a big problem with the speculators. The speculators have no intention of taking possession of the commodity they're speculating in - they're in it for themselves - only themselves, and if the speculators drive crude back to $140 - $150/bbl with $5 gallon gas the global economy will crash again. This time the math says a second "global" crash will be UNRECOVERABLE.
The whole world needs to look at how speculators hurt us and put serious limits on speculation, BEFORE OPEC's cuts start working.