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Greg Merrill
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Greg Merrill is a fee only Registered Investment Advisor (RIA) in Tacoma, WA, USA managing taxable and tax free portfolios for individuals and high net worth investors.
My company:
Strategic Asset Management
My blog:
Merrill over Matter
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  • Oil inventories creeping upwards
    While oil prices have not done much recently total oil product inventories have been creeping upwards in America and throughout the rest of the OECD.



    Looking at total US oil and petroleum products inventory levels you will see they are at 20 year peaks!  The OECD is also above its 5 year average inventory levels.


     
    So if the industrialized world is filling up with oil where is it all going and why have prices not dropped?  Some possible reasons are:
    * Emerging market demand and specifically China is a great unknown regarding their inventory and usage.
    * The Iran / Israel situation is keeping people jumpy. 
    * The financialization of commodities provides a firm bid on oil prices. 
    * Hurricane season is just warming up in the US.  We'll see how much carnage they produce.


     

    Here's some previous entries on the topic of hurricane season:
    http://merrillovermatter.blogspot.com/2009/08/weather-and-oil.html
    http://merrillovermatter.blogspot.com/2009/09/so-far-no-hurricanes-this-year.html

    Disclosure: Long RDC (Rowan Drilling)
    Tags: USO, XOM, CVX, RDC
    Sep 09 1:54 PM | Link | 2 Comments
  • Some contrary copper talk
    I recently blogged about the rising copper inventories worldwide.   Copper inventories keep growing at an accelerated pace.

     
    So why are prices rising as well?  I see a few items driving prices higher right now, those being the dollar, an expectation for a recovering worldwide economy, and strikes at copper mines in South America.
     

     

     
    The recovering world economy and China specifically has been the standard mantra for why asset prices are rising, whatever the asset.  If China is rebounding, why are Chinese copper exports rising?  If China has a desperate need for copper right now why are the traders sending copper out of the country?  Don't know, but this does not coincide with the bullish copper thesis. 
     

     
    There have been several strikes in South America at copper mines and several large copper mines have their work contracts ending in the next two months (Reuters list) .   So far all the striking mines have gone back to work and contracts at some mines have recently been concluded. The long running (40+ days) BHP / Spence mine copper strike just ended.  (Bloomberg)   Spence mine produced about 500 tons of copper a day so you can add that to the 2000+ tons / day of excess inventory already going into inventories.
     

     
    A recovering housing market has been the hope of copper bulls as well, but as you will note from my numerous housing posts I do not think new home construction will come roaring back in America any time soon.  I suggest you go to Calculatedriskblog for the full details on American housing.
     

     
    I don't have any short positions on copper or copper miners as the momentum upwards is just too strong and it fits with the worlwide reflation theme.  When this theme ends I fear copper prices could revert lower if inventories keep rising.
     
    Tags: FCX, TCK, SCCO, BDD, BDG, BOM, BOS, copper
    Nov 30 2:22 PM | Link | Comment!
  • Fill er up! Where is all the oil going?


    The oil markets are always fun to watch and while the popular media concentrates on how much higher oil can go, I'd like to point out some bearish data.

    Oil and oil products in America are on the rise and nearing levels not seen in at least 20 years.

     

    While the I do not have access to the raw data for the OECD, graphs from the International Energy Agency show the same trend.

     

    (If you have access to additional data on inventory levels in America, OECD or emerging markets I'd love to see it.) I present this information not to buttress a prediction for lower oil prices but to highlight some info that contradicts the current outlook.

    Some additional factors for oil:
     
     
    + Peak oil - We'll eventually run out of the oil we pump out of the ground. When production will fall off and how much is finally extracted is up to debate. LONG term I am of the opinion prices will be much higher than they are now, the path to those higher prices is unknown in my mind.
     
    + Geopolitical - The Israeli / Iranian situation could heat up at any time and if the missiles start flying oil prices will rise.
    +/- Oil is priced in dollars - Concerns regarding a weakening US Dollar have played a major factor in daily oil price movements.
    - Excess supply - OPEC has cut supply and has the capability of pumping more. The timing and extent of their supplies are entirely up to them but for now that excess supply is available.
    - Cheating by OPEC members - Cheating does happen by the member countries.
    - Floating storage - Oil tankers are being used to store oil and refined products throughout the world. While some of this storage is due to the contango trade earlier in the year, the profitablility of storing then reselling has dropped dramatically. Additional reading: http://ftalphaville.ft.com/blog/2009/07/22/63186/nothing-bullish-in-crude/ Sources: http://tonto.eia.doe.gov/dnav/pet/hist/wtestus1w.htm http://omrpublic.iea.org/stocks/stkxs_oc.pdf
     
    Disclosure: Personal account: long RDC, client accounts: short USO call spreads, long RDC
     
     

    Published at  merrillovermatter.blogspot.com/ on 07/22/09

    Tags: RDC, oil, energy
    Jul 28 4:29 PM | Link | Comment!
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