With so much oil flowing, U.S. may be reaching storage limits

Nobody knows that for certain and there are lots of scenarios. But as space gets tight, it gets increasingly more expensive to store oil. That should discourage speculators from buying oil and storing it, hoping to sell it later for a profit. If fewer speculators are buying, that means there’s less demand and prices fall.

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“We’re running out of storage capacity in the U.S.,” Ed Morse, global head of commodities research at Citigroup, said at an event recently in New York. “And we’re seeing the indication of the U.S. reaching tank tops. It’s hard to know where the price goes down, but it does go down.”

The price of oil has already fallen from $100 a barrel last summer to $45 or $50 lately. Morse said lack of storage space could drive oil down to around $20 a barrel.

But there’s plenty of disagreement about that. Brian Busch, the director of oil markets at Genscape, says oil prices could fall, but not that much.

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