OPEC, for some quiet moments..

[admin]

The FT Alphaville article (already featured earlier here) is pretty useful as a primer on the changing structure of the oil market:

Because lenders did not like this kind of volatility and unpredictability attached to spot oil prices, they wouldn’t invest unless prices were ridiculously high, to cover the fear of losses. This, he believed, led to under investment in oil infrastructure, leading to an effective self-squeezing effect, that ironically would lead to even more volatility. To get around the spot price volatility and overshoot problem, Simmons recommended the industry move to long-term pricing contracts instead. But now, shale’s faster “time to build” factor changes the risk paradigm completely. In short, because the industry can bring new supply to market relatively quickly, we go from a spare capacity model, to a just-in-time model instead.

A capital contango, and why oil storage economics may be dead | FT Alphaville