[Ryno]

Question: Does anyone have any insight as to why the US would have a 3 week stretch wherein we've dramatically added to crude inventories, in spite of the apparent global deficit?

It may be noteworthy that 4th quarter supply, particularly December, was up. Nonetheless, the globe is still running in deficit mode per the IEA's latest data.

If the US, and the OECD on a broader scale, is a proxy for global inventory, there is a seeming contradiction.

Any thoughts? What am I missing?

[yesplease]

I think pup55 would be the best to answer this, but... My guess is that demand for gasoline is dropping since I've seen prices drop consistently recently, so refineries are cutting back on production and crude levels are increasing a bit.

[pup55]

$this->bbcode_second_pass_quote('', 'a')pparent global deficit?

[joewp]

Of course, at this point, "afford" means being able to palm off worthless debt-based fiat money for oil. That situation cannot continue. At some point, not too far in the future, the oil producers will demand real value for their precious commodity, not mere electronic bits that can lose their half their value to monetary inflation the next time the Fed cuts rates by 1 1/4 point in less than two weeks.

[frankthetank]

joewp-

I think about that a lot and it amazes me. Only thing i see is a lot of military muscle ready to bring freedom where ever it may be needed.

[eastbay]

Also, there is some supply available because some people are priced out of the market. There are plentiful examples of this in the "global fuel shortage" thread at the top of this page. If you cannot afford to buy oil, someone else gets it.

Well put pup55.

I think this is the answer he was looking for. Global oil production has been generally and roughly flat for the past two and a half years, yet consumption in the PRC, India, and across much of SE Asia (and a few other places) has risen considerably during this period. Of course, as we all know, the pie is only so big. This means others are making do with less oil. At some point all areas will have to make do with less.

The 'market' knows this very well, which is much of the reason the p/bbl price of oil is holding up so well in spite of pending worldwide economic uncertainty.

[joewp]

$this->bbcode_second_pass_quote('frankthetank', 'j')oewp-

I think about that a lot and it amazes me. Only thing i see is a lot of military muscle ready to bring freedom where ever it may be needed.

[Tyler_JC]

$this->bbcode_second_pass_quote('joewp', '')$this->bbcode_second_pass_quote('frankthetank', 'j')oewp-

I think about that a lot and it amazes me. Only thing i see is a lot of military muscle ready to bring freedom where ever it may be needed.

[Valdemar]

China needs us more than we need them. They can't, and will not, start a war because they are unhappy over not expanding at an insane 11% a year. They will simply have to scrounge for resources elsewhere, expand more into Africa as they are now.

Sooner or later, they'll bump into the US, but at that point I doubt major diplomatic scuffles will be all that uncommon given the rest of the globe has probably started bickering over being priced out or denied resources for growth or basic survival. No one right now gives a shit when it's only Third World hellholes being screwed over.

[dorlomin]

The point being that even if it takes a bigger hit in doing so, China can now do suffient damage to the US economy to make its opinion of very serious interest to the US policy makers. This is why we now live in a multipolar world again. Other peoples opinion count.

[pup55]

A further point:

A year ago this week, crude oil futures were trading about 54. Today, they are roughly twice that.

But there is no apparent shortage of oil, and inventories are increasing. Why did the price not drop this fall, when it should have, and why is it not dropping right now, like it should?

The answer is, last year at this time, the inventory of crude oil was, at 324 million barrels at this time, people had plenty of crude oil on hand, so they did not feel like going into the market and filling up their storage tanks even more with expensive oil. So, the price fell.

This year, with the inventories at about 290 million barrels, the psychology is different. People are actually filling up their tanks with $90 oil, when last year, they were turning their backs on $60 oil.

You have to wonder whether this was a deliberate strategy by OPEC, to starve the system down a little bit. Basically the same thing happened in Europe: their inventories also went down over the last year, by a similar fraction. Maybe they are smart enough to figure out that they can pump roughly the same amount of oil and get 50% more money for it if they just find a way to get the excess inventory out of the system. An alternate theory is: they can't help it, they are pumping all they can, and no longer have control of the market.

We also have the issue of China. Unfortunately, they do not put their inventory out on a weekly report, or we would try to analyze it. However, news reports all last fall were talking about major fuel shortages and a lot of other problems over there that are making people crazy. There were some reports of riots, etc. at one point last fall. So you have to figure that China is also competing for some of this supply.

In about 4 weeks, starting roughly March 1, the US refinery system will start to spin up for its spring and summer run. We will find out at that time how much crude oil is in the system. The latest data from OPEC suggests that they turned on the spigot in November and December last fall, and so the import spigot should turn on in a few weeks. Actually, it is turning on right now, as you have noted.

If it doesn't, then hold on to your wallet.

[AirlinePilot]

This is an excellent thread. I think another key ingredient is how ugly things looked just a few months back compared to historical data. We moved into this winter at a considerably lower inventory number than ever before. We have a good bit less time to replenish inventory and it looks like that is happening but as others have pointed out, it's only because we can afford it.

Dantes interesting numbers yesterday also may point to all not well with crude estimates. His post referred to some significantly corrected numbers for crude (a reduction). That tends to worry me a bit.Here is his post,

$this->bbcode_second_pass_quote('DantesPeak', 'T')he EIA was out with their revision to November 2007 inventory figures, and they may come as quite a shock.

EIA Monthly Inventory

Oil inventories were revised down 5.7 million barrels, gasoline down 1.1 million, and distillates revised up 2.1 million.

Overall commercial inventories were revised down a rather huge 11.3 million barrels, pushed down by a large revision in the 'other oils' category.

Usually the EIA will include the monthly revisions in its next weekly report.

I haven’t had time to do much research lately, due to some new additional job duties. Also I have experienced some ‘unplanned maintenance’ of my home person computer. Recent reports from tracker firms Oil Movements and Petrologistics indicate that OPEC January production was about the same or slightly higher than in December.