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Page added on August 3, 2016
Beware oil inventory data, experts warn it’s misleading markets
Oil markets are once again in the doldrums amid fears of a persistent oversupply and concerns over the slow drawdown in U.S. inventories, but oil experts say those concerns are overdone.
“We are at the start of the rebalancing, we haven’t finished it yet, whereas the market almost priced in that everything was done but now it’s gone almost the other way, saying that no rebalancing has been done whatsoever,” Amrita Sen, the co-founder and chief oil analyst at Energy Aspects, told CNBC Wednesday.
Oil prices remained subdued on Wednesday with U.S. crude below $40 per barrel and Brent under $42 a barrel amid continued concerns over an oversupply of oil, although prices did receive some support from a weaker dollar, Reuters reported.
Analysts expect prices to continue to be under pressure from rising supplies, high crude inventories and an uncertain demand outlook. But Sen said that markets had overestimated how quickly the glut in oil supply could clear and were being impatient.
“It’s not that the rebalancing isn’t happening, of course it is happening, but we also have a huge amount of inventory overhang that needs to be run down …. a lot of people have been disappointed at the pace of inventory drawdown,” she said.
Sen also noted that inventory data could be misleading because there was a lot of oil floating on water (oil held in floating storage at sea) that was being offloaded but was not being captured by official inventory weekly statistics, such as those put out by the U.S. Department of Energy’s energy information administration.
“If anything,” she added, “when oil on water is discharged on land, it makes the inventory on land look even bigger and I think this is where part of the problem lies.”
Nonetheless, Sen said the rebalancing motion was “very much in motion.”
“We are dropping supplies like a stone, non-OPEC supplies have fallen by over a million barrels per day over the last three to four months and it just takes time. The market always wants things very quickly,” she added.
All important inventories
Oil markets on Wednesday are focused on the U.S. Energy Information Administration’s usual weekly look at oil inventories with the data due at 10:30 a.m. ET. Figures from industry group API late Tuesday showed an in-line stockpile reduction of 1.3 million barrels.
Markets have become somewhat obsessed with analyzing the figures for signs of a rebalancing in supply and demand.
Last week, U.S. crude futures fell more than 2 percent after the EIA reported an unexpected rise in crude and gasoline inventories. It said last Wednesday that U.S. commercial crude in storage rose by 1.7 million barrels to a total of 521.1 million barrels in the week through July 22. Analysts had expected a draw of 2.3 million barrels.
Like Energy Aspect’s Sen, Stephane Foucaud, managing director of institutional research at FirstEnergy Capital, told CNBC on Wednesday that the U.S. inventory levels were misleading.
“At the moment, all eyes are focused on the inventory level in the U.S. and I think that although market participants expected the inventory level to go down a lot, they have gone down but perhaps not as much as people expected, and as a result it’s all about a glut, an oversupply and so forth but I think the data is perhaps a bit partial – one of the reasons that the inventory has not gone down as far as expected is because the U.S. has imported a lot,” she said.
Foucaud said that other data seemed to suggest that the market was actually “already balanced.”
“Also we do not have a picture of the overall inventory level around the world so it’ll be interesting when we get that data. I should think that we are currently selling more than we produce and that as a result, the demand is perhaps higher than production so the market I think is already balanced.”
Sen and Foucaud are not alone in believing that oil market sentiment is over-bearish with both Citi and Standard Chartered issuing reports stating that there was no justification for the recent oil price declines.
Not everyone was in agreement with the experts, however, and Peter Toogood, investment director at City Financial Investment Company, offered an investor’s perspective on the oil price, telling CNBC Wednesday that the glut of oil “is massive and the usage is not in the zone where you want it to be.”
22 Comments on "Beware oil inventory data, experts warn it’s misleading markets"
makati1 on Wed, 3rd Aug 2016 5:54 pm
Hahahaha! Beware of ALL data coming from corporate or government sources. Mostly lies, cover-ups and red herrings. Usually to get suckers to invest or to vote.
onlooker on Wed, 3rd Aug 2016 6:10 pm
So true what you just said Mak.
Boat on Wed, 3rd Aug 2016 7:43 pm
Cnbc must have forgot about Libya and Nigeria.
Meanwhile two of our resident doomers reject all data. Lol Yet they love books by authors who use data to write their books.
makati1 on Wed, 3rd Aug 2016 7:44 pm
Boat, but we also know to not take that data as fact. There is a difference.
onlooker on Wed, 3rd Aug 2016 8:12 pm
And our resident idealist Boat, believes what he is told by the mainstream media. Like a good little slave. We have had a chance to change course too many good little slaves. At least the last paragraph is correct of this article
“the usage is not in the zone where you want it to be.” Demand destruction
Northwest Resident on Wed, 3rd Aug 2016 8:47 pm
I saw a similarly themed article on Yahoo earlier, top of the page. Looks like a full court PR press is on to keep the muppets invested in the oil industry. If those muppets start leaving in droves, which they will eventually (or lose their ass trying), all hell will break loose. Looks like Boat is along for the ride, to the bitter end!
rockman on Thu, 4th Aug 2016 9:26 am
IMHO one of the serious problem with stats is that many folks accept them on face value and don’t bother to learn how the numbers are calculated. Especially difficult when the source doesn’t disclose the dertails of the methodology. So very true with polls. In fact last poll I saw showed 87% of those responding thought all polls were BS. LOL.
Boat on Thu, 4th Aug 2016 11:16 am
rock,
That was funny.
When institutions explain their methodology and then make revisions they still get complaints. They will even dream up deep state conspiracy theories.
GregT on Thu, 4th Aug 2016 2:16 pm
Boat,
That was sad. You’ve obviously lived a very sheltered life.
People conspire Kevin, always have, always will. The larger the gains, the bigger the conspiracies. It’s just basic human nature. Ignorance of reality doesn’t make it go away.
onlooker on Thu, 4th Aug 2016 3:25 pm
More and more conspiracy theories are proving out in light of our awareness of how corrupt the corporations , banking system and govts have been and are. At this point the deluded ones are those who refuse to believe any or much of this information. I hear the footsteps of the skeptic Ennui
Outcast_Searcher on Sun, 7th Aug 2016 6:27 pm
Always with the “demand destruction” meme from the doomers.
And what would that be from?
The bigger houses people tend to buy (and heat and cool)?
The bigger cars in record people are buying to celebrate low gas prices (and happy “stylinh” motoring)?
Or a global growing population and economy that, aside from 2009, has been demanding and using more crude oil year, after year after year.
Aside from in your doomerish heads, where is the evidence of the demand destruction?
Davy on Sun, 7th Aug 2016 9:22 pm
Most people today are not capable of seeing systematic decay, deflation, and depletion? You can have demand destruction within a growth meme. The demand destruction is rotting the foundation and at some point the whole edifice will collapse in on itself. Yes, even as it is growing it will be destroyed.
Apneaman on Sun, 7th Aug 2016 10:32 pm
outcast, my whole life I been hearing how owning a home is the foundation of the American dream ad it’s the same in Canada. What happens when an entire generation can;t afford to own a home?
Millennials cause homeownership rate to drop to lowest level since 1965
http://www.cnbc.com/2016/07/28/millennials-cause-homeownership-rate-to-drop-to-lowest-level-since-1965.html
Student Debt Crisis 2016: Millennials Regret College Loans, Struggle To Pay Them Back
http://www.ibtimes.com/student-debt-crisis-2016-millennials-regret-college-loans-struggle-pay-them-back-2350170
Why are millennials tapping payday loans and pawn shops?
http://www.reuters.com/article/us-column-rebell-pawn-idUSKBN0UL0FP20160107
Everything is awesome because they are buying cars on 7 year terms and getting payday loans to pay their cell phone bill so it doesn’t get cut off. Yep, your capitalist paradise is as strong as ever – tell yourself. LMAO
GregT on Mon, 8th Aug 2016 1:17 am
“The bigger cars in record people are buying to celebrate low gas prices”
Gas prices are not low. Contrary to popular belief, repeating a lie over and over again, does not make it the truth.
GregT on Mon, 8th Aug 2016 1:17 am
“The bigger cars in record people are buying to celebrate low gas prices”
Gas prices are not low. Contrary to popular belief, repeating a lie over and over again, does not make it the truth.
Boat on Mon, 8th Aug 2016 8:24 am
Poor greggiet, he can’t remember the $3-3.80 gas for 6 years. The last year in Houston gas has averaged less than $2. Greggiet lives in his own little world using his own personal definitions blaming the jew deep state for the confusion. lol
GregT on Mon, 8th Aug 2016 10:25 am
Poor Kevin, has the attention span of a 9 year old, and can’t remember the price of gasoline for the first 50 years of his life. Could it be the early onset of dementia, on top of sheer stupidity? Or does stupidity alone affect his memory?
Boat on Mon, 8th Aug 2016 10:43 am
Greggiet,
I remember 25 cent gas. I also remember $2.75 per hr. Now we have $2.00 gas and a $30 per hr wage.
GregT on Mon, 8th Aug 2016 10:49 am
Here Boat, this might help stimulate those lonely living brain cells.
http://www.randomuseless.info/gasprice/gasprice.png
GregT on Mon, 8th Aug 2016 11:10 am
That’s quite the memory you have there Boat.
In 1978, the year that you should have been at the age to enter the work force, the average price of regular gasoline at the pump in Texas was .65/gal.
http://www.bls.gov/opub/ted/2013/ted_20131205.htm
The minimum wage at that time was 2.65/hour. My first real job in 1980, I was making 12.50/hour. Were you mowing the neighbours’ lawns?
https://www.dol.gov/whd/minwage/chart.htm
Boat on Mon, 8th Aug 2016 1:28 pm
Actually I washed dishes on weekends at $1.25 in 1973. Also worked Wednesday evenings at a local theater. Yes I was required to buy my own gas. Normally gas was around 35 cents but that year there were several gas wars. They had those back then. In the summer I bailed hay at $2.50. PS didn’t live in Texas.
Boat on Mon, 8th Aug 2016 1:35 pm
Actually I washed dishes on weekends at $1.25 in 1973. Also worked Wednesday evenings at a local theater. Yes I was required to buy my own gas. Normally gas was around 35 cents but that year there were several gas wars. They had those back then. In the summer I bailed hay at $2.50. PS didn’t live in Texas.
In 1975 was my first factory job. I think gas had jumped to $.65 by then. It did pay $2.75.
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