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There are only so many tankers around that can be used for storage, and it costs a pretty penny to lease them. Sooner or later, they will have to unload, flooding markets where there just isn't that much demand.
Exactly right. When the oil in those futures contracts arrives, the holders of those contracts either have to sell the contracts (and the oil that goes with them) or take delivery. The only way that speculation can drive price over the long run is through hoarding, and when we're talking about a commodity like oil where the US alone on average imports 10,000,000 barrels of the stuff a day, that's a lot to hoard.
The fundamentals, at this moment, don't seem to support a robust market.
Market fundamentals are turning into a running joke. Checked the stock ticker lately? Floyd Norris had an entry on his NY Times blog yesterday wondering why a bankrupt company's shares were trading for up to a buck and closed the day with a market cap of close to half a billion dollars for something that is worthless. (Post linked in sig.)
