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Thinning inventories risk nonlinear oil price spikes
The guest argued that thinning global petroleum product inventories could push the oil market from orderly, linear price movements into a volatile, nonlinear spike.
The argument
While crude oil inventories still have a small cushion, refined products like diesel and gasoline are running close to tank bottoms. Military disruptions to Russian refining capacity and hoarding by major nations exacerbate this product shortfall.
The thesis, stress-tested
✓ What validates it
- ✓Brent crude retesting and breaking above $100 a barrel
- ✓US diesel and gasoline inventories falling to critical seasonal lows
▸ Risks discussed
- ▸A sharp global economic slowdown could destroy demand and rebuild product inventories
- ▸China could decide to aggressively export refined products to ease global tightness
Hear it yourself
"It's a thinning cushion, John, And I'm increasingly worried that these tensions could eventually turn what's been relatively orderly market where prices have moved in a linear fashion more or less, and we end up being pushed into a nonlinear event, meaning that rather than just steady movements, we started to see spike key behavior."
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