Schork Oil Outlook: Gasoline Demand/Prices Out of Sync
April 21 (The Schork Report) -- We do not mean to sound like a broken record when it comes to high crude oil prices, but there is no other way to put this. The bullish banks repeatedly claim that demand will return as the economy improves, and refiners can pass the high cost of crude on to the consumer. Well, the economy is improving, but consumers have started to walk away from gasoline at prices they cannot afford. Refiners cannot pass on the costs, and the major oil players are hemorrhaging money on the downstream. And still the May contract ran above $87 last week.
The bulls are carrying out an experiment of high crude oil prices based on the assumption that demand will catch up. In our line of thinking, that logic is perplexing (to be polite), i.e., in a fundamentally bullish market does not demand push price, rather than price pull demand? To wit, if the market were truly concerned about pending supply imbalances relative to perceived demand, wouldn’t the WTI and Brent markets already be trading in backwardation prior to the summer driving season?
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