Wednesday, July 08, 2009
Here. The bottom line is that supplies of finished motor gasoline are up over last year, the supply of diesel moved up slightly, and the four week running average of imports is 775,000 barrels below last year's.
Crude inventories are 17.8% above last year's levels. Total stocks ex SPR are up 13.7% above last year's levels. YTD YoY comparisons of total product supplied for domestic use are down 5.9%. Motor gasoline demand for the last four weeks is now up 1.3% over last year. This supports the idea that some employment is popping up somewhere, perhaps in temp jobs. We'll see how this carries through the summer. The four week running average of distillate demand is now down 12.3% from last year.
From the narrative:
...U.S. crude oil inventories are above the upper boundary of the average range for this time of year. Total motor gasoline inventories increased by 1.9 million barrels last week, and are in the upper half of the average range. Both finished gasoline inventories and gasoline blending components increased last week. Distillate fuel inventories increased by 3.7 million barrels, and are above the upper boundary of the average range for this time of year. Propane/propylene inventories increased by 1.3 million barrels last week and are above the upper limit of the average range. Total commercialThere is certainly no support for oil prices in this report. Gas prices have peaked and are dropping:
petroleum inventories increased by 5.1 million barrels last week, and are above the upper limit of the average range for this time of year.
Thank goodness! Living with leveraged speculators (using central bank liquidity) pimping up the price of oil is infuriating. Very damaging to our economy. Especially since it forces us to transfer wealth to oil producing nations.
I will continue to believe the markety is being gamed until there is regulation of the ICE in London.
This doesn't necessarily say anything about the economy yet--it was pretty clear that the market got ahead of fundamentals. If the market breaks down below the March lows come this fall, I'll be digging a bomb shelter in the back yard.
You'll have to wait for a hurricane, and I wouldn't get your hopes up even then.
Oil may go below $40 again. It could conceivably go below $25.
On the one hand, I am concerned about energy speculation. On the other hand, the commodities market has a real function (when it is working). I am wondering just what regulatory steps are going to be taken, and whether we'll overshoot the mark.
I can't argue that it is currently working, because when prices keep getting boosted to the point that the end products aren't selling, one should take it as solid evidence that it is busted. There is also the disturbing reality that high fertilizer prices have reduced usage enough to cut into some ag production.
In part, I believe this situation has been created by pervasive groupthink involving a mass delusion that the equation of supply, demand and price does not apply to oil. But it does.
Profit reports are due! Any greenshooty joyousness will be somewhat dampened by the reality that many corporations are still struggling to align expenses and revenues.
I think that in the back of peoples' minds, a 40% rally means that the bear market is over, even if the path forward has its ups and downs. In reality, a 40% rally would be entirely normal in the *middle* of a bear market of the magnitude we've got here.
I can't say the market will break below the March lows, but even if it stays above those levels, I don't see a new bull market starting here. The best case is a sideways 1970s-style market for the next 10 years. The worst case is 1932. My expectations are somewhere in the middle.
The Dems want to keep speculators like hedge funds, ETFs, and such out of the commodity markets. They want to limit it to real hedgers like oil companies, chemical companies, airlines, drillers, etc. ie Those who have a commercial interest in hedging against price changes. But many are arguing that you need the speculators in there to make the market liquid. I think they're correct about that, but if the speculators are big enough to distort the market that's a problem. IMO, this issue is really important because energy prices are so important to our economic success. I hope they get some answers so these markets can work the way they're supposed to.
It's not just speculation. It's also the tremendous leverage that is used. A small amount of money can control a huge amount of oil in the futures market.
I'd like to see the leverage throughout the financial system cut back to ~ 6:1. Any leverage beyond that is counterproductive. Reduced leverage would force people to produce and save, not speculate and borrow.
Our system has morphed into a casino where a few steal the work of the many.
We need to squeeze the privilege out of the eCONomy.
They have a way around the CFTC called the London loophole.
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