[Winstonm]

The following is from Insights by Dr. Gary A. Shilling, a well-known and highly touted economist who writes an article for Forbes magazine.

May 2006
“Deceiving Oil Inventories: Crude oil prices have leaped, in part due to tiny excess capacity and fear of supply disruptions while demand climbs. The jump is also due to the world's excess cash gravitating toward oil, including the futures market.
The resulting contango, with distant futures prices well above spot prices, encourages inventory-building for those with storage capacity. So, ironically, inventories and oil prices are climbing together.
Inventory holders can sell forward and lock in huge profits, but crude prices must climb further just to keep long holders of distant contracts even. And excess inventories are lethal to prices in the long run, regardless of short-run rationales.
At some point, crude prices will start down and speculators will dump their long positions while the contango's demise will induce inventory holders to disgorge, adding to the price collapse. A $30 to $40 per barrel price drop is reasonable before prices rebound."

What do you think? Is this credible?

[mike777]

Shilling is like Dr. Death....well printed...but I doubt many put millions on his thoughts.

Contango is very common......see my papers from 20 or more years ago.


At some point........non Gas motor cars will make sense!