IT SOUNDS like a scene from “The Big Short”, a film about financial speculation. Light aircraft fly photographers close to America’s oil-storage facilities, using infra-red imaging and photographs to gauge the rise and fall of levels of crude in 2,100 storage tanks, in an attempt to work out whether oil futures are overvalued or not.
In fact, it is less mischievous than that. The intelligence-gatherers work for a company, Genscape, that sells the information to traders everywhere, giving them a few days’ jump before storage surveys are published by the government.
These data are particularly useful at a time when near-record levels of oil inventories in America are weighing on oil prices and frustrating attempts by OPEC, the producers’ cartel, to prop up the market. The high level of inventories is vital to an understanding of why crude prices suddenly plummeted this month, according to the International Energy Agency (IEA), a forecaster. West Texas Intermediate is back below $ 50 a barrel, its level before OPEC in November agreed to cut output (see chart).
Three reasons explain why the tanks are so full….
The Economist: Finance and economics
