One of the best indicators of true oil demand is looking at whether oil is trading in backwardation or contango. If oil is in backwardation (front month contract is more expensive than future months) that shows there is strong current demand for oil and that is why people are willing to pay a slight premium. If oil is in contango (front month is cheaper than future months) it is an indication that demand for crude oil is currently weak.
With this said what can we tell about the future price of oil by examining oil's current price structure. Right now oil is in contango with current demand relatively weak but investors and the market believe that it will pick up again in the future. But what is particularly interesting for traders is that the amount of the contango has widened quite a bit. About 10 days ago the cost of rolling a an oil contract from one month to another was 30 cents. However by the close of today the contango had increased to $1.50 per month. To me this shows that current demand is weakening--against the general market expectations of increasing demand. It will be illuminating to see how this plays out: either demand for oil picks up dramatically in the next few weeks (typically May,June,July are good months for crude oil) or there needs to be a severe price adjustment lower to reflect market fundamentals.
I also like the fact that the entire oil market is heavily skewed to the long side which could help the accelerate the price adjustment by dumping their positions. You can see from the chart below that large specs are heavily long oil while the commericals (who are usually right) are heavily short.
You can see from the following charts that the fundamentals of oil are poor with high inventories, not only in crude oil but also in gasoline and distillates. One other factor that should also impact prices is the recent volcano eruption in Iceland which has grounded European flights. This had caused a large glut of jet fuel (which is an oil derivative) and add to the high inventory numbers. This is why I am currently short oil (have been for 1 month). However this is somewhat of a dangerous position because it goes against the seasonal trend in oil prices which usually leads to an increase in prices due to the summer driving season. But I am willing to take the risk for a good potential reward (like oil going to $65).
Crude Oil Inventories
Gasoline Inventories (egregious levels of inventories but I am still paying $3.30 a gallon in California LMAO!)
Chart Sources: Nowandfutures.com
Black Swan Insights
(Still short crude oil)