Wondering why commodity prices have been dropping despite the supply/demand imbalance. Well, commodity trading houses have seen margin calls and are short of liquidity, many have been unable to buy commodities to be delivered to refiners/end users. Expect shortages of finished products as end user inventory draws down over the next month or so.
the key passage here
“In private, industry executives acknowledge they are skipping some deals to conserve cash. Lots of the price volatility of recent days can be traced by trading houses and others avoiding taking positions. The commodity market is trading risk, rather than supply and demand fundamentals. Liquidity is thin.”
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