“Davidson” submits:
Having studied $WTI price movements in detail it is clear that every rise and fall is spoken of as an increase or decline in consumption. Even a 0.1% change in the weekly reported working-inventory levels, in the 420,000,000 range, send $WTI in a scramble of conflicting opinion. The next report is often a reverse and receives an equally strong response by traders. In my experience $WTI is more market psychology than anything connected to economic reality. The current rise is in my experience, due to a reversal of a significant down-side hedge to protect equity portfolios and may even recently include some attempt to offset inflation effects as it is becoming increasingly clear that inflation will prove more persistent than the oft quoted “transient”.
The working US crude inventory as reported this week is more or less in line with the long-term trend from 2003. That chart was sent out yesterday. It is repeated below expanded. $WTI is forecasted by some to reach $300/BBL. The data does not support this by any stretch of the imagination. But, market psychology is market psychology. It is, what it is.
US has self-sufficient supply.
Limited supply: WTI crude oil hits $95 for first time in over a year
The latest data out of Cushing, Oklahoma, the nation’s major oil storage hub, has commodity traders on edge again, with a steep drop in inventories compounding worries about tight global supply. Last night, WTI crude futures (CL1:COM) even touched $95/bbl at 9 PM ET, continuing a big rally that began at the beginning of the summer. In fact, crude has soared about 40% over the past three months, with West Texas Intermediate jumping another 3.6% on Wednesday, marking its biggest gain since early May.
Inflation watch: Further drawdowns at Cushing would spell more trouble for an already tight oil market due to the deepening supply cuts from Saudi Arabia and Russia. Inventory levels in Cushing have been cut in half since June, and now stand at just below 23M barrels, or a level that’s close to the operational minimum. If tank storage falls below 20M barrels, the oil can become sludgy and difficult to remove, potentially adding to upward pressure on prices and renewing fears of inflation.
“The U.S. has, in essence, bailed out the rest of the world from an oil supply shortage, but that is about to come to an end,” writes Investing Group HFI Research. “U.S. crude storage will not build during refinery maintenance season [in October]… and one of the bear factors was demand, but demand is holding up well.” Oil stocks have also reflected similar sentiment since the summer, with big gains seen for companies like Chevron (NYSE:CVX), Conoco (NYSE:COP), EOG Resources (NYSE:EOG), Exxon Mobil (NYSE:XOM), Hess Corporation (NYSE:HES), Occidental Petroleum (NYSE:OXY), Pioneer Natural Resources (NYSE:PXD), Schlumberger (NYSE:SLB) and Valero (NYSE:VLO).
