Gigem77

Crude Inventories: Largest Weekly Build Since March 2001

Well bob keep your eye on the scoreboard. Global demand is up and it's going higher. Your premise is wrong, the US is affording 150 oil with only a small drop in demand. We are still burning over 20 million barrels per day of petroleum products. Demand in the BRIC countries and in OPEC is rising and they have the money to buy oil.

Last year the price of oil rose 46% in the US. In Europe it only rose 18% due to the currency exchange differences. So the pain is not equally distributed and the weaker dollar concentrates the pain in the US.

Crude Inventories: Largest Weekly Build Since March 2001

bob, the Chinese subsidize fuel for their citizens. The subsidies create shortages, so there is pent up demand. China and India have growing middle classes that are larger than the entire US population. They have money. Also, China is revaluing the yuan against the dollar, which moderates the price rise.

The average American is still affording several hundred gallons of gasoline per year and demand increased each of the last 4 weeks that prices fell.

Crude Inventories: Largest Weekly Build Since March 2001

The build in crude inventory was due to a one off event. Shipping was delayed by "Edouard". Imports in the lastest reporting period rose to 11 million bpd instead of the usual 10. That's 7 million extra barrels and it completely explains the build in today's report.

Refiners are not producing nor importing as much gasoline as last year due to demand suppression and to lower crack spreads. The important take away is that refiners don't owe anybody cheap gasoline and will cut production to stay profitable. OPEC will also cut production to maintain their price targets.

OECD countries show reduced demand. BRIC countries show increased demand. World demand for crude is still growing. Seasonal demand in the northern hemisphere is lowest in the summer and higher by 2 million bpd in the winter. So let's see how this unfolds going into the fall shoulder season when refiners switch some production to heating oil. And then let's see how the market handles this years' winter heating season. I think we will see higher prices.

Q4 Oil Price Targets

Hey! they left out Jason Schwarz' prediction of 30 dollars. That's discrimination against SA.

Crude Oil at Bearish Extremes

Oil has held the 112 support and is heading up. Gold is already 40 bucks off the lows set last week. Short one or both and lose money.

A Case for Retreating From Oil Investments

There are two glaring omissions. The concepts of depletion and decline are missing. We are depleting existing reservoirs of crude at a rate of 74 million barrels per day. As the wells age, the rate of production declines. A well that begins life producing 10k barrels per day, falls to lower rates and ultimately stops producing. We have to find more oil to replace what is depleted and to keep production static.

The Saudis may bring new projects online, or they may delay production as their King has indicated. But their additions to world production must be matched against subtractions elsewhere. Indonesia dropped out of OPEC because they are net importers now. Mexico and Venezuela are demonstrating declining production. U.S. production peaked 30 years ago and is declining 4-5% per year.

OECD demand destruction has been matched by ROW demand growth. The high demand quarter is just ahead too. The past 4 weeks of lower prices saw U.S. gasoline demand creep higher week over week. Demand was not destroyed as the media keeps spouting, it was merely subdued. Commercial inventories of crude are lower than normal. If oil drops below 110, look for those inventories to be replenished. Demand increases as price falls.

A bullish EIA report sent the spec shorts scrambling to cover today. How much of the recent drop was caused by shorting?

This has been a speculator driven fire sale caused first by long liquidation and then by shorting. Fundamentals are still strong and this dip was a great buying opportunity. While you were selling into and after a 20% or worse loss, I bought APA, CHK, RIG, BEXP, HK, PBR, NOV and DVN. The market never valued these stocks for $147 oil. Once the reality sinks in that crude is not going below 100 and maybe not below 110, the market will revalue the entire sector more appropriately, say 30-40% higher from here.

Energy Demand: China vs. the World

I agree. China is the biggest part of the demand story. Demand is also increasing in OPEC countries and in Russia. They will export less as their internal consumption grows. Also, the Chinese are revaluing the yuan. Since oil is priced in dollars, they are gaining an advantage in the currency exchange.

Oil Consumption Growth Slow

World demand for oil is growing every year. It is the rate of growth that has slowed. This is the same problem with semantics that we have with government when they say that they "cut" the budget and mean that they cut the rate of growth from 8% to 5%. The world is burning 85+ million barrels per day. Are we finding oil at that rate? The price has risen from 12 to 95 bucks a barrel over the past 10 years with few signs of elasticity of demand. Supply from "megaprojects" takes several years to begin to come to market.