Peak Oil Passnotes: The Oil Market Heats Up

The oil and energy markets like to paint themselves as very scientific places. From the geology to the deep water technology, from the super tankers to the powerpoint presentations. But as we all know the truth is nothing of the sort.

For the regular reader of this column the idea of a herd mentality on the market is nothing new. We have looked at times when bullish signals spell bearishness and where bearish signals sell bullishness. You can make your mind up on what we have now.
The crude oil market has been parading around the corral for a while wondering which direction in which to break out. Finally it has decided to go a test the gate over at the high end of his range. Banging about around $60.50 has started everyone talking again.

But just one second. This is the week when the Energy Information Administration said U.S. crude oil inventories had risen not fallen. By a reasonable 3.7 million barrels to 327.6 million barrels. Somewhere around 200 billion cubic feet of gas were also withdrawn, it sounds a lot, but what is in reserve is still some way above the five year average at this time of the year.

What is overly worrying the markets is refining, namely for gasoline. In the downstream area we should be looking at creating some decent stockpiles for the summer, any time soon. Instead U.S. refining capacity was only at 85% of capacity, production of gasoline fell to 8.6 million barrels a day and nice distillates also fell by 3.8 million barrels a day.

But the reality is that there is enough capacity in the U.S. and Europe to sate demand.

Resource Investor