It was all about a temporary shortfall of physical oil. WTI is a midwest (landlocked) crude that can only be consumed in the midwest (it cannot even come to the GC). The P/L from USGC to midwest that carry crude are rigged to flow north from US Gulf coast to midwest. They cannot be easily reversed. Hurricane IKE had disrupted a few of the refineries and their main crude P/L (Capline) was also down for a few days because of hurricane's impact, so no foreign crude flowed north.
One or 2 midwest refiners tried to buy small parcels of physical WTI crude and bid up the prices. Since October contract was expiring, the NYMEX volume was already thin and there is no "rolling" that demand because refiners needed crude NOW. Thus, Oct contract closed at $121, but Nov (now the new front month) closed at 109 & change. They don't need Nov volume because the foreign crudes will fill that void coming up from Capline. Hope that helps ... Anil
?" almost a panic shout. The 9/11 impacts were more subdued.). I turned on CNBC when I got to where I was going and it was a big topic but the short squeeze was mentioned. We should see oil about $15 lower tomorrow based on the November futures. Spot didn't budge. Refinery margins are currently very tight due to continuing poor demand (not inside info but somehow nobody seems to hear this). This ultimately means crude will continue to fall unless somehow the economy magically begins growing at 10%.
