The Oil Drum

69 comments on This Week in Petroleum 9-12-07

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westexas on September 12, 2007 - 6:02pm

A copy of my post on the Drumbeat thread (which I posted prior to today's EIA numbers):

I'm going to write a little missive for Graphoilogy on this topic, which I have addressed before, to-wit, refiners will not let their crude oil inventories drop below critical levels.

If refiners can't afford to bid the price of crude up enough to keep their inventories in a comfortable range, it stands to reason that they would reduce crude oil input, thus reducing product output.

So, I expect to see crude oil inventories more or less staying in a "comfortable" range (48 to 96 hours of supply in excess of MOL), with declining product inventories, and flat to falling refinery utilization numbers.

Crude oil inventories are at 80 hours of supply in excess of MOL. IMO, what the recent (five year) crude oil inventories show are just minor fluctuations within a narrow range above MOL, as the industry has gone to a Just In Time inventory system.

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Black_Dog on September 13, 2007 - 8:18am

Crude oil inventories are at 80 hours of supply in excess of MOL. IMO, what the recent (five year) crude oil inventories show are just minor fluctuations within a narrow range above MOL, as the industry has gone to a Just In Time inventory system.

Another reason for the continued increase in the price of crude might be that the temperatures along the northern tier states of the U.S. have been rather cold for this time of year. In fact, there have been many reports of record low temperatures, some below freezing.

If we see a colder winter than those of the past few years, how is the Just In Time system to respond, given that the source of any extra the supplies are several weeks away from demand?

E. Swanson