Besides the obvious, that is.
When you are long and the price is at record levels across the board you have made money. So you cash it in, so do lots of people. All the way down the line people are cashing in their long positions, even if they got in at a reasonably high price. So the two mixed together makes one thing, volatility.
It is opposite to the end of last year and most likely this one too. Then, traders wanted huge bonuses for themselves and the people they work for. So after the hurricanes, they shorted the market to pieces. It forced oil to its current absolute floor, $55, so that they could make a lot of money. It is no conspiracy; it is just that everyone involved knew the rules of the game. Then when the combination of a low price and lots of short puts came to its conclusion, the price boomed back up.
Unfortunately for the bears, U.S. gasoline stocks have built in this particular week every single year this decade. Yes, that is right, U.S. gasoline stocks always build about now. It might be something to do with driving habits, holidays or the end of the maintenance season but they always seem to do this. The average this century is a 2.9 million barrel build. This week was a 2.1 million barrel build, below average.
That was a big enough signal for selling. U.S. demand was also revised downwards for February, so that too gave a few people reason to jump on the mini-bandwagon. But now we have made another sharp move up through record prices, underpinned by geo-political fears and the basic lack of a supply cushion. Without wanting to sound slightly repetitive, this is the same story as the last four years.