Oil producers around the world continue to pump, profits or not, because they need the cash flow. Inventories continue to rise and in fact domestic US storage facilities will soon be full, despite frenzied construction of additional tankage.
But the price of crude is rising – not because of any recovery in demand, but because the big banks that hold much of the oil patch’s low quality debt are desperate to offload their risk onto the naive and foolish, who can be persuaded that there is some “recovery” in oil markets. So the HFT algos are set to maximum boost. Of course, shorts are being squeezed and this means that the ultimate collapse will be vicious. But the banks are expecting that their customers will chase the price momentum and ultimately be the ones who suffer for their bad judgement.