The price of oil continues to drop. Earlier today, February Brent fell below $40/bbl. It is now at $40.23. WTI is also down. This follows a rather steep drop yesterday. Inventories continue to build in the US Midcontinent, and reports that oil companies are leasing supertankers to store crude are common. In the Midcontinent, Cushing storage is almost full up. (This is why WTI delivered in Cushing is selling at a discount to Brent, in contrast to the typical relationship where WTI sells at a premium.)
This accumulation of inventory will have a lasting effect on the price of oil. Even when demand turns up (and who knows when when is?), much of that demand increase can be met by drawing stocks down to more normal levels, thereby dampening any price recovery. Inventories may well continue to build, moreover, due to the fact that supply is very inelastic in the short run, and shutting down wells is a costly proposition.
Update: Urals Med (per WSJ) was quoted at $33.87/bbl this PM in Europe. Ouch! Or, should I say —Ð¾Ð¹!