Crude Oil Inventories

Crude oil inventories are set to come out at 10:30 this morning, and the consensus is calling for a build of 900 thousand barrels. So far this year, over half of the weekly inventory reports have shown a larger than expected build in inventories, yet oil was trading at an all-time high and up over 20% on the year just this Monday. So what gives?

In the chart below, we show weekly crude oil inventories this year versus their long-term weekly average. As shown, at the start of the year total inventories were well below average, and while the gap has narrowed, total crude oil inventories are still less than their long-term trend. While the narrowing of the gap is a step in the right direction for those who would like to see lower oil prices, the current environment shows that oil supplies remain tighter than normal.

click to enlarge

Comments

[AmesTiedeman]

The Oil pull back has begun. My first target is 100 then 88. Boone Pickens is long and wrong.

[JREwing]

hahahahahahahahahahaha...

[AmesTiedeman]

The Fed is done, The Dollar will rally, and Oil will now fall.

[John Egan]

Apparently the price spike was due to a strike in GB, blown pipelines in Nigeria, ongoing issues with Chavez... In other words, the same old stuff....Thx jegan

[Kezorm]

Let's see.... Russia announces they have peaked, Mexico warns that they will not be able to maintain export levels, the Saudi's repeal claims of ever getting to 15 Mbpd, and have stated that even when they arrive at 12Mbpd of capacity, they would rather not produce at that level.

Meanwhile, China's oil imports are 8% higher than same time last year, and total emerging market demand now exceeds USA demand.

Maybe I am missing something. How do these facts amount to the popping of an oil bubble? Got news for you. It ain't the sound of a bubble. It is cavitation as the HMS Hubbert's Peak leaves the harbor. And the itinerary plans only to minimize the wake while passing the Iraq production buoy before heading out to open sea where the she turns into a hydroplane.

[JREwing]

Well, I don't know, but does anyone really think, that the Fed Funds rate makes or breakes the dollar??

'Uh, the only thing they ever do is printing money.' Than what did the ECB do? Sure, they didn't cut interest rates, but they provided banks with hundreds of billions of Euros in liquidity. Every country prints money, when their economy or financial system is in the toilet. Even Jim Rogers' beloved Chinese are gonna print money, when they run in their first crisis. Hell, look at the Canadiens, they have more Commodities than most countries, they provide the United States with a lot of oil, and still manage to have to cut interest rates. And if the Germans ( full disclosure: I am one) wouldn't hate inflation so much, you can bet, that the ECB would have cut as well.

So, the US is in a bad fix, because the US economy is so inefficient in their use of energy. That is going to change, one way or the other.( It is about time, Americans fall in love with the turbo diesel. 70 miles a gallon, love it. Goodbye stupid Biofuels. Cost more energy, than they provide and are more responsible for inflation than Bernanke ever was.)

And when the pain gets big enough, the US will finally start to drill in ANWR and the OCS. They are gonna stop, using Nat-gas for power generation, and use nuclear, clean coal, wind and solar, instead.

Incompetent airlines will hopefully go under and make way for competitors, who don't have to whine about jet fuel prices, but can afford a modern, fuel efficient fleet. ( Get rid of Chapter 11; broke companies should be wiped out and only used for 'spare parts', at best.)

As, for Europe. Ok, they are more fuel efficient. But they import all of it. The North Sea has peaked some time ago. Britain became an oil importer. The bulk of their oil and gas comes from Russia, which is peaked, as the commentator above wrote. So, the Russians are friends with no one but themselves and simply want the best price for their product. I don't blame them. I would do the same damn thing.

The problem for Europe is, that unlike the United States, they lack the military capabilities to back up their energy needs and secure their supply lines of virtually every commodity there is. There is no country in Europe with a fleet capable of doing that. In fact, they have no strategic capabilities, whatsoever. Poetry-socialists may like it not, but in the end it comes down to just that.

To make a long story short: Europe is still totally dependent on the United states, when it comes to their security needs. And even if Europe had those capabilities, they lack the guts to use it. I mean, Germans have a heart attack every time on of our guys in Afghanistan is involved in a traffic accident.

There is an interesting STRATFOR article about how Japan, South Korea and China build up their strategic capabilities.

www.stratfor.com/weekl...

There is no reason at all, to be bullish on Europe. It is a demographic disaster happening and it is ruled by socialists, yea even so called conservatives are socialists, when it comes to economic policy. I call them Christ-Communists. Once their tax revenues exceed their expectations by five bucks, they spend ten on some 'present' to the 'little people'. National debt is just as disastrous than in the United States, private households are not much better. 10 % of all families in Germany are unable to pay their debt. Infrastructure is just as old than anywhere else. It took them 30 YEARS, no sir, I'm not kiddin', 30 years to get permission to build an additional runway for the Frankfurt airport.

So if i had to choose where to invest, Europe or the United States, I choose the US over Europe any day of the week.

[AmesTiedeman]

CrossingtheT,

What say you now? Look at DUG, OIL and USO...
I rest my case.

[paultaut]

Why is it that the Fed is supposed to support the Dollar....is this something new?

The Fed's role is to control inflation and keep the economy growing. The Treasury's role is to keep the Dollar strong.

The Secretary of the Treasury just announced that the financial crisis is closer to the end...euphoria...to me that just means IT IS NOT OVER...everyone thought it was over and the equity markets are rallying...idiots...

There was a Bull on the Cover of Barrons, earnings are being bolstered by lowered expectations and overseas strenght, inflation ratchets upward but is hidden by liars that figure, and more and more financials are hiding massive loses on the Fantasy level...ie Level 3, the mark to fantasy or Zero...Between Goldman, Lehman and Morgan S. this Level now holds 170 BILLION worth of unmarketables.

Nothing moves in a straight line...trendlines are meant to be broken...new patterns can't be seen until after the fact.

Another shoe will drop on the Financial side which could bankrupt the Fed...Crazy...this is the Third Fed in our nations history...the other two went bankrupt.

[JREwing]

Ames, let's talk at the end of the year. Q4 is gonna get tough again. May is always the weakest month of the year. With all the big emerging markets economies subsidizing gasoline and diesel, there is no way in hell oil will go down, except for corrections like this.

I never denied that there are corrections like this. In fact i like them, because I can buy my drillers at a discount.

So, in the short term you are right. I give you that.

[ALBY]

Peak oil fundamentals will certainly drive oil prices at the macro level, but in between, the markets will certainly go up and down and will not do so rationally. The oil markets will undulate with fear and greed. and while oil demand is generally going to increase faster than supply, the effect of high oil prices is going to wrak havoc on the OECD economies and demand will rise and fall as a result.

Both Kezorem and Crossing the T are right. Crossing the T is channeling Mark Steyn and he gets a big hell yea for that. Kerzorem is channeling Matt simmons and he gets a big hell yea for that.

I am short oil now, but I'll go long at some point. Same with Gold. I agree with you all about the fundamentals, but I'm going to play the stochastic moves in the meantime.

A little leprachaun once told me " Steal twice as much as you need, or you'll never have enough. Amen.

[JREwing]

And hell yea to you too, ALBY!