Trends in Oil Inventories: Difficult to Measure

There was a draw-down on oil inventories that helped to push markets higher. (Note: Correlations these days are unbelievably high across many market segments.)

We have seen these numbers see-saw on a weekly basis, giving us little trend to lock onto. Clearly total inventories have been dropping as the demand has stabilized. Just as the draw-down this week was larger than expected, next week can easily show just the opposite.

Disclosure: Horowitz & Company clients may hold positions of securities mentioned as of the date published.

Comments

[e2800:]

We always get the headlines from the main sources, you know them GDP, up 3.5%, home prices up 10%. Rarely do we ever get the underlying numbers, or an honest analysis.
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 05 01:56 PM

[untrusting ...:]

e2800,
Great summary and reflects the reality of oil, at least in the US markets anyway. But this author and the MSM consistently attempt to "spin" the reported facts to attempt to support the bullish arguement, when the real facts are far less supportive of the bullish case.


On Nov 05 01:56 PM e2800 wrote:

> We always get the headlines from the main sources, you know them
> GDP, up 3.5%, home prices up 10%. Rarely do we ever get the underlying
> numbers, or an honest analysis.
> 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 05 05:28 PM