Rig count is decreasing at a rate only surpassed in 1987 . (Stand to correction)
Even so, US oil production is at record levels and increasing at a rate, bar no other time. Huh, I hear you say? Oil producers are competing heavily for revenue to fund insolvent companies and service cheap (junk bond status) corporate debt.
By some calculations, spare oil storage capacity is about to run out in May or June. At that point producers will need to flog surplus to a market that does not want it nor has space to store it.
High probability point number 1: Oil is about to get alot cheaper. To what price, who knows.
If I owned the market, I would be faking out the market to the upside (before the price falls through the floor) and pull in every pimpled faced newbie trader/investor's buy orders (A genuine fake-out)
Point number 2: I am waiting for the price to fake-out $54 resistance with a new high above that, somewhere.
News will hit main stream media about storage, might even have Q1GDP slowdown news by then, throw in some slow growth in China news.
Short: Short when you see the fear candle above $54 and hear the "bad news" that has been known for months.
Commitment: 5% equity based on SL used.
No trade: I will stay out if the fake out does not occur or fundamentals and/or the current environment changes significantly.
Exit: When oil is being pumped onto the streets or when the US government announces some sort of corporate oil bailout, subsidy or tax cut or all of the above. (I don't know, make a judgement call)
Time frame: 1 or 2 months till entry, maybe. Exit, ask Obama.
What could happen is Cushing hits tank tops...oil owners at that location have no choice but to start dumping oil onto the open market (downward pressure)...a lot of people have bought into long ETFs (USO, etc) as the price starts to fall some lose their nerve and sell (more oil on the market), price falls further..... It reverses when the price falls low enough that oil can be had at Cushing for a song (say $25-35 barrel) so anyone with an oil truck is racing to Cushing to load up on a cheap spot price in oil while simultaneously some oil produces simply cap operating wells to stop the flow.
This may not happen....probably 25% chance, but since there IS at chance no one is going to bid up oil too much until we are certain it won't. We probably won't be certain until oil inventories start to fall, or at least don't build anymore.