With little supply reduction from Russia as a result of the price cap in the short-term, and given a lot of these barrels trade sub-$60, supply is not a problem, and the oil curve backs that up.
Meanwhile, the demand side debate rages: China reopening vs US recession risk. In the near term, the market is arguably too optimistic about reopening as mobility trundles.
The fact that oil has now flipped into contango has added to the concern, given “physical” tightness has been the lynchpin of the bullish narrative for the past 18 months.
Macro correlation has been weighing on crude as energy move in lockstep to US recession risk, with early-year focus returning to macro sentiment rather than the evolving China fundamental story.
But you can not discount the unseasonably warm weather that has completely dulled any semblance of a sharp edge in NAT GAS prices. Hence there will be less gas to oil switches than previously anticipated.
But let us not mask the real problem; liquidity is horrible and discretionary traders have little interest in standing in front of a non-stop roller coaster, especially when it crests the peak with everyone quick to book profits.
The market could also be sitting on negative gamma from recent programmers, further exacerbating down moves.
Market makers are seeing some early bargain hunting from retail in early Asia, but even those tiny volumes coming down the pipe were good for 50 cent rise.