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TheDude
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 Posted: Wed May 21, 2008 10:48 pm Post subject: Oil Rises Above $135 - Unexpected Drop in U.S. Inventories |
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Bloomberg.com: Worldwide
| Quote: | May 22 (Bloomberg) -- Crude oil rose to a record above $135 a barrel in New York on concern that supplies are inadequate after U.S. stockpiles unexpectedly dropped last week.
U.S. crude inventories fell 5.32 million barrels to 320.4 million barrels last week, the biggest drop in four months, the Energy Department said yesterday. Gasoline supplies plunged by 755,000 barrels when analysts expected an increase.
``The price was roaring before the inventory report and was going up regardless, but that gave it the extra push,'' said Rowan Menzies, head of research at Commodity Warrants Australia Ltd. in Sydney. ``I'm beginning to think that this is a serious macro event, with oil at these levels, and it's going to have some serious consequences.'' |
Oh wait, it was lower at this time in 2005. Really lower in 2004.
Frickin' newbs. Yuz pwnd, proto Doomers!
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Hogan
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Joined: Oct 25, 2004
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Location: Stalag 13
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| Posted: Wed May 21, 2008 10:52 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| This is not good news. The peak of the US driving season is just now starting and supplies are already at a 4 month low. Shortages and rationing coming this summer? |
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DantesPeak
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Joined: Oct 23, 2004
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| Posted: Wed May 21, 2008 11:07 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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Refineries have stepped up production recently, thus using more oil. Imports are down 250,000 bpd this year.
Small changes in supply/demand can eventually push inventories below the minimum operational levels needed for the smooth functioning of the oil/oil product delivery/refining network. |
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Tyler_JC
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| Posted: Wed May 21, 2008 11:07 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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I highly doubt we are anywhere near shortage levels.
We aren't even outside of the average range yet!
Mountains out of mole hills, anyone?
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DantesPeak
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| Posted: Wed May 21, 2008 11:10 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| Tyler_JC wrote: | I highly doubt we are anywhere near shortage levels.
We aren't even outside of the average range yet!
Mountains out of mole hills, anyone? |
No, but if the supply/demand imbalance changed by even 100,000 bpd, it would take less than 200 days to reach critically low levels. If changed by 200,000 bpd, there could be problems in as little as 100 days. |
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TheDude
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| Posted: Wed May 21, 2008 11:14 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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Drifter...look at the EIA historical data on stocks. You'll notice that we've had crude inventories lower than this on many an occasion. My point is that these NYMEX nimrods are so freaked out about prices they're paying way too much attention to these "massive drops," which are nothing out of the ordinary. With fewer people hitting the road this year they're even less meaningful.
I'm betting consumption will be way down this summer for some reason, so not worried about going below the MOL (which is estimated at ca. 270 billion barrels). I think that'll take a pretty severe supply disruption.
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TheDude
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| Posted: Wed May 21, 2008 11:18 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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You expecting producers to start cutting exports for short term gain, DP?
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Novus
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Joined: Jun 21, 2005
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| Posted: Wed May 21, 2008 11:19 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| TheDude wrote: |
Oh wait, it was lower at this time in 2005. Really lower in 2004.
Frickin' newbs. Yuz pwnd, proto Doomers! |
Either way the US is going to have to replace that draw down. In 2005 that oil could be had for $50 and in 2004 $40. In 2008 oil was at $130 and every single barrel of it was spoken for. In order to free up some supplies prices had to go up by a lot. In 2005 nobody had to go without for the US to consume what it needed. If $135 doesn't destroy some demand then we are going to $140 or $145 or maybe it will be the US to first one to blink at this game. |
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joewp
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| Posted: Wed May 21, 2008 11:19 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| Tyler_JC wrote: | I highly doubt we are anywhere near shortage levels.
We aren't even outside of the average range yet!
Mountains out of mole hills, anyone? |
You can't trust that chart because it doesn't break down the gasoline inventories based on finished gas versus blending components. Blending components are a higher portion of the inventory than even last year, if I recall correctly. The weekly storage report just tells us whether finished gas or blending components went up of down during the past week. I believe this week was the first time in several weeks that finished gasoline actually increased, but since they don't tell us numbers we don't know what the mix of finished to components is.
It's becoming apparent that the refinery runs are so low because they can't get the appropriate quality of oil to refine.
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BigTex
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| Posted: Wed May 21, 2008 11:24 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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Demand destruction will happen at some point. It takes time for people to begin re-ordering their lives around higher fuel costs.
I actually think that the U.S. auto industry is going to be booming in a couple of years when they roll out efficient vehicles and everyone rushes to buy them and give away their SUVs and trucks.
Frankly, this is exactly what we need. I have been watching wasteful uses of energy for years and will be happy to see a lot of it stop.
One example is big trucks idling at truck stops 24 hours a day. That's ridiculous.
There are lots of examples of that kind of thing that will stop as prices continue rising.
Another one that comes to mind is tightening up building standards dramatically and building smaller houses, but that only becomes cost effective when energy reaches a certain price point.
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DantesPeak
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| Posted: Wed May 21, 2008 11:26 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| TheDude wrote: | | You expecting producers to start cutting exports for short term gain, DP? |
I should have mentioned net finished product imports (diesel + gasoline) are down 350,000 bpd. So the total import loss is 600,000 bpd with demand down 400,000 bpd.
We're losing 200,000 bpd since late February. Then as joewp says, that 200,000 bpd loss may be more specifically in the oil or oil product category we really need to have enough supplies. |
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Hogan
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Joined: Oct 25, 2004
Posts: 1331
Location: Stalag 13
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| Posted: Wed May 21, 2008 11:31 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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I keep hearing the term 'demand destruction' thrown around a lot like it's nothing. Maybe demand destruction should really be called 'economy destruction' or 'lifestyle destruction'. Demand destruction and capitalist economies don't mix well.  |
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BigTex
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| Posted: Wed May 21, 2008 11:34 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| Drifter wrote: | | I keep hearing the term 'demand destruction' thrown around a lot like it's nothing. Maybe demand destruction should really be called 'economy destruction' or 'lifestyle destruction'. Demand destruction and capitalist economies don't mix well. |
I agree that it's bad, but demand destruction in fossil fuels is at least possible, whereas demand destruction for something like oxygen for breathing would never occur. As supply stopped meeting amount demanded, people would just die.
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Hogan
Light Sweet Crude
Joined: Oct 25, 2004
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| Posted: Wed May 21, 2008 11:41 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| Hey Tex, I agree. I just wonder how much 'demand destruction' people can handle in their lives before everything falls apart. That's the big question. |
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BigTex
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| Posted: Wed May 21, 2008 11:48 pm Post subject: Re: Oil Rises Above $135 - Unexpected Drop in U.S. Inventori |
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| Drifter wrote: | | Hey Tex, I agree. I just wonder how much 'demand destruction' people can handle in their lives before everything falls apart. That's the big question. |
We spend a lot of energy on entertainment. I see that being the first area people are likely to cut without it hurting immensely.
There is a lot of just aimless driving around that will be reduced.
It will probably be easier to reduce consumption in the U.S. than in Europe because we have so much more waste that can be eliminated.
This whole "summer driving season" business is not essential. People can just stay home.
In other words, I think there is a lot of demand destruction that WILL occur without it being the end of the world. The problem is going to be when even with that demand destruction prices remain high or even continue rising because of either declining production or continued increases in demand in other parts of the world.
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