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You know the year on year numbers are far more interesting than the Upper End of Range BS they keep feeding.
My math shows total commercial inventories down 56 million barrels YOY.
A million+ a week.
That range is bogus anyway. Its the 5 year average plus 2 std deviations plus "seasonal adjustments".
Whatever that means.
Kehbab's inventory graph in the other thread is far more revealing.
That range is bogus anyway. Its the 5 year average plus 2 std deviations plus "seasonal adjustments".
Whatever that means.
Could you elaborate on why an average with standard deviation is bogus? I mean, that methodology has been employed by the EIA and the IEA as long as I can remember. Did it just now become bogus? Someone should tell them.
What I find interesting is that when those inventories are climbing, we don't hear anything about it. Only when they fall. So, even if they just go up and down, all we ever hear are "inventories are falling!" I noted this last year, when they fell (the sky is falling!), and then they came back up (silence).
You know the year on year numbers are far more interesting than the Upper End of Range BS they keep feeding.
No, it isn't. Why don't you take a look, and get back to me with exactly when inventories came out of the range to the high side, and stayed above the range? See if you can identify a cause for that. And regarding that, I have said for a long time that I expected inventories to eventually come back down within the range as oil companies started to develop amnesia regarding why they started carrying them so high. But we haven't put in a bunch of new tanks in the past 3 years. So, refiners have been carrying high inventories. At $90 a barrel, is it any wonder that they might decide to pull them down? If you ran an oil company, and thought that this was a speculative bubble, what would you do? I know what you do if you think oil has peaked, but believe me they don't.
Some of you guys literally amaze me. You get a cause in your head, and that can be the only cause. I talk to people in the business about this stuff every single day. I got first hand information from someone yesterday that the current price is exactly why they are choosing to pull inventories down. Their tanks are full of $80 oil, and they want to try to wait it out and refill them with $80 oil. They are knowingly taking a risk, based on what their internal forecasters are telling them. If prices don't come down, they are stuck refilling them with $100 oil. But by not refilling them, they continue to add to the perception that supplies are insufficient.
My math shows total commercial inventories down 56 million barrels YOY.
Let's review the numbers. Crude is down 22 million barrels, to 313 million barrels. Of course a year ago crude was in record high territory. Did you expect it to stay there? I didn't, and have said as much many times. You have a lot of money tied up in that inventory, and at $90 you will seriously weigh those inventory decisions. Gasoline inventories are down 10 million barrels, at 195 million barrels. They are legitimately very low, and I have been harping on gasoline inventories since spring. Distillate inventories are down 6 million barrels, and are at the top of normal for this time of year.
Why is it that people think the draw down is the anomaly? Look at the run-up in crude inventories to all time record territory earlier in the year. That jumps out immediately as the anomaly - not the draw down back into normal territory.
It strikes me as anomalous that the price would go so high when refineries are NOT buying it. The doesn't jive with your assertion that supplies are adequate, because it implies that were the refineries to buy enough oil to keep inventory levels stable, it would push the price even higher. And higher prices are what you see when demand begins to outstrip supply.
Or is someone out there producing oil and not finding a buyer?
*Some* refiners are holding back *some* of their purchases.
Maybe I'm wrong, (Robert? WT? anyone?), but I would assume that decisions to tap inventories are not all-or-nothing, but rather a question of degree. Refiners will continually take delivery of some (roughly fixed) volume crude (50% of total throughput? 80%?) because the system can't handle sudden large shifts in demand - gotta keep the pipelines flowing and the ships and money moving. The balance will be sourced on shorter notice from the markets or the refiners' stockpiles.
It is that balance that refiners use to respond to market conditions. So most refiners are scaling back their marginal production, to cut costs, and using inventory oil for that production, because they think the price will come down.
The real question is, why are margins so thin?
Why don't refiners just refine less? Due to fixed costs, if they refined less, they'd actually cut their margins even more. Okay, why don't they refine more? Because increasing utilization rates increases their relative costs (overtime, maintenance, etc.). Refiners are just sitting at their Goldilocks point in the curve: operating at absolute minimum profitability. Why don't they raise prices? Could be competition from a European gasoline glut (or ethanol), or weaker consumer demand.
Very interesting problem, all around...
You show a very good grasp of the situation. Refiners would love to raise prices and increase margins, but demand is softening. That puts them in a tight spot.