Crude Oil Inventories Show a Sharp Decline

Oil is getting a boost this morning following the weekly EIA inventory report which showed that crude oil stockpiles decreased by 3,963K barrels (expectations called for a build of 1,500K). At a time of year when stockpiles are typically rising, today's inventory decline came as a big surprise.

click to enlarge

Comments

[ryanclarke:]

Question: What's more dire than the 3,963K barrels depletion in U.S. oil stockpiles?

Answer: Not one barrel increase in gasoline stockpiles in the U.S. ... which should be happening this time of year.

Nov 04 11:56 AM

[Wampeter, F...:]

Bit of a typo in the lead in sentence, stocks decreased not increased.

Nov 04 12:29 PM

[Mad Hedge F...:]

vji If you think oil is expensive here at $80, look again. The Department Energy chart below of US oil consumption per unit of output shows that, in fact, we are at a 40 year low in the price of crude. In other words, it takes half as much oil to produce a unit of GDP than it did in the late sixties, when 12 miles per gallon was considered reasonable, and only Lincoln Continentals got abused because they consumed a gluttonous six miles per gallon. This is the why current lofty prices are having a negligeable effect on a reviving economy. The other chart shows the price of oil in inflation adjusted terms. Again, we are at the high end of the range, but nowhere near the top. What’s the lesson in all of this? If the price of oil is not hurting now, then it will move a lot higher to where it does hurt big time. When the US gets back on track, and the emerging markets return to firing on all 12 cylinders, triple digit oil is a gimme, and new highs will easily be attainable. Then you can expect the current perfect correlation between rising stock and crude prices to shatter. Make sure you maintain exposure to the oil patch, either through majors like Chevron (CVX) (click here ), oil service companies like XTO Energy (XTO) (click here ), the Russian market ETF (RSX) (click here), or just the plain vanilla Oil Trust ETF (USO). If noting else, these names will help immunize your portfolio against the certainty of higher fuel prices. If you are wondering where the “W” recession might come from, this is it.

Nov 04 01:07 PM

[Warm_Paw:]

Oil is getting a boost this morning following the weekly EIA inventory report which showed that crude oil stockpiles increased by 3,963K barrels (expectations called for a build of 1,500K). At a time of year when stockpiles are typically rising, today's inventory decline came as a big surprise.

3963 K > than 1500 K

That means an increase in inventory, not a decrease.

Oil prices at present are strictly tied to the value of the US Greenback. Everyone agrees the Fed is not going to raise rates, thus oil is not about to take a whipping.

Should the Fed raise rates, oil falls in price on the barrel.

I'm typing slow so you don't get this confused.... ;-)

Nov 04 01:54 PM

[untrusting ...:]

Bespoke,
Whether inventory goes up or goes down is only important relative to whether imports went up or went down. You fail to mention what happened to imports. Did imports go down? In other words, if average imports are 25 million barrels a week and this week they are only 20 million barrels, then you would expect inventory to go down by 5 million barrels. Your article fails to mention the import level, and thus the information you provide is virtually meaningless. If the US quit importing oil altogether for a few months, then the inventory would go to zero, but that in no way means anything for demand or usage. Your article implies increasing demand of oil, but that conclusion simply cannot be made without also looking at import levels and other factors such as splits between production of gasoline, diesel, and other refined products.

Nov 04 05:19 PM

[Mill Rat:]

Below is a link to an interesting Wall Street Journal story from 14 months ago (Sept 4th, 2008).

At the time of the article, the CFTC apparently felt the need to investigate whether "energy market players" were manipulating the oil inventory data which is reported to the EIA.

online.wsj.com/article...

Thoughts, anyone?

Nov 04 05:59 PM

[e2800:]

Today's stories on the crude inventory numbers again give the headline number with no analysis. Headline says, "Crude Rises on Decrease in Stocks". Lets take a look at the report.
1) Oil refineries are running at 80.6% of capacity. This is extremely bearish.
2) Refinery inputs were 233,000 barrels per day below last weeks average. Bearish.
3) U.S. Crude oil imports were down 764,000 barrels per day from the previous week. Bearish.
4) For the last 4 weeks imports have averaged 1.5 million barrels per day less than the same period a year ago. Bearish.
5) U.S. crude inventories are near the upper limit of the average range for this time of year. Bearish
6) Total motor gasoline inventories are above the upper limit of the average range. Bearish.
7) Distillate fuel demand is down 14.8% year over year, jet fuel demand down 3.1%.
Bearish

There is more, but you should get the picture. A decline in stocks right now is due to a demand problem, not a supply problem. All of the above statistics point directly to a decrease in demand for crude and distillates. If refineries were running at 90+% of capacity, maybe, maybe we could see a supply problem, but not now.
One other thing, the latest COT report shows approx. 227,000 money managed fund long contracts and about 24,000 short.
As the saying goes,"The market can stay irrational longer than you can stay solvent."

Nov 04 06:38 PM

[chris coonan:]

gas prices rise, fueling loss in retail spending over christmas, and then the crash ensues....

Nov 04 11:24 PM