Making It Up On Volume aka. Mutual Assured Bankruptcy

Idiocratic question of the day, month, year: Why do oil producers pump so much oil at low prices?

A: Because they have to...they're making it up on volume...

WTI Net Longs are back at November levels and price is back at November levels. I think we all see where I'm going with this...

As we just confirmed today, the oil "bounce" was all mega-short-covering...

U.S. Oil ETF: Had record short interest at last month's low, which has now been reduced by 60% (article below)...

"Investors used the rally to cut their losses..."

In other words, the scenario I predicted last month of spot oil prices falling through the floor was pre-empted by mega short covering on a level not seen since this time last year. Gamblers were betting that the ETF would get pounded again by contango rollover, as it has been every month, but instead they got pounded. That short-covering primarily in the ETF, bid up the front-end of the curve and sold down the back-end, collapsing the "contango spread". 

However, as expected, the spread is widening again. Because let's face it no one really wants to own "oil". Shorts were not buying the ETF they were covering a previous sale, while longs were getting out. 

The wider this spread, the more the ETF will get pounded next week and vice versa as the front-month gets sold. The USO rollover begins April 6th and ends April 11th. On a spread basis, half of the short-covering bounce has already evaporated...

May - June (May is front month quoted contract):