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U.S. Oil Supplies in Storage Set to Pass the 400 Million Threshold
A year ago oil in storage stood at 374.1 million barrels, and with another robust year of domestic production, and despite curtailed imports, the US Oil Inventory stands at 391.4 million barrels and climbing.
We are still technically in the building season for oil supplies which peaked in late May just shy of 400 Million Barrels, before the drawing season kicked off with the exporting of gasoline through increased refinery utilization led by the gulf coast refiners with their increased capacity to take advantage of the spread differential and cheaper operational energy in natural gas to export refined products more competitively than peer nations.
New Records Coming Soon
The domestic need for refined products was stagnant at best, the real demand was in the export market, without a robust export market for refined products, oil supplies would have crushed the 400 Million Barrier this summer, and prices at the pump would have been much cheaper here stateside.
So the drawing season accounted for roughly a 40 million barrel retracement in US supplies, and we are not even close to the middle of the building season, which even by conservative estimates should continue until mid-March of 2014.
We might have some year-end selling of US inventories due to tax reasons, especially in Texas, but after all is said and done, if we go by the recent historical barometer of last year where we added roughly 25 million barrels of oil supplies to inventories, this puts supplies around the 416 Million Barrels of Oil level in the heart of the building season.
If domestic production continues ahead of pace and imports are not properly managed then maybe 425 Million Barrels in storage is possible, all modern records at this point in the data.
Fundamentals & Price: A Path Less Traveled in Recent Years
What effect this has on Oil prices is an entirely different matter as the Oil market is one of the most manipulated markets in the trading world, just look at the Brent-WTI Spread Trade this year for proof of that, and over the last 4 years for that matter.
All markets are pretty bad these days when it comes to market shenanigans, and when the Federal Reserve has basically gotten into the business of artificially created wealth through artificially pushing up asset prices all bets are off when it comes to predicting price adhering to fundamentals in the marketplace.
Fundamentals have become irrelevant in most markets these days. But some of us analyst types like to do fundamental analysis just for old time`s sake, who knows it might become a useful tool again sometime in the future once markets lose this unprecedented liquidity injection phenomenon.
Domestic Production
In looking at Domestic production, the US produces over 8 million barrels per day compared with 6.8 million this time last year, quite a significant jump year on year, and ahead of where my most optimistic forecast was for this metric earlier in the year in March of 2013. This increase in Domestic production is being offset by a reduction in Oil imports with the US importing 7.7 Million barrels per day versus over 8.1 million barrels this time last year.
Managing Imports
So the goal is to control supplies through managing imports to align with the substantial increases in Domestic production over the last several years, and this trend continues to play out at present. How far this strategy can go before world oil prices start reacting with considerable downward pressure is anybody`s guess but definitely something to keep track of in 2014.
Reading: U.S. Oil Imports Hit 13-year Lows
But the last several months have had several weeks where Domestic production is more than Imports, and this milestone is quite an achievement for an ‘Outsourcer’ Nation with its core economic strategy of the last 30 years for goods and services.
2014 & Oil Metrics
Thus if we go by recent historical trends is the 9 million barrels per day of Domestic Oil production really possible for 2014? Can the US hit the 9.5 Million Barrel per day mark? And if so what does this mean for Global Oil prices?
All these dynamics will be worth watching in 2014, to be sure there are other factors revolving around China, Iran and Venezuela not to mention Saudi Arabia`s strategy in regard to Oil production, but nonetheless 2014 ought to be an interesting one for the Oil Market.
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the SPR will soak it up for fiat bucks
In the end fiat bucks will kill the fiatee economy as we are witnessing in the US. No amount of printing will change that---- except for a War here or there predicated on winning those Wars, which we are not. And Wars
happen to be energy intensive leading to more fiat printing creating a vicious cycle the financial system can not reconcile without cooking the books. Sound familiar ?
In the long run, it's about the cost of the marginal barrel of production. EconMatters doesn't like to look at that.
no he doesn't, he's a pretty consistent spokesmodel.
it's about the cost of a marginal barrel AND a fictitious economy that denies that truth
"Econ Matters" must be a college class project and the kids are looking through the professors' straw, unable to see that a world-wide currency crisis is fast approaching, and whatever is left of US gold reserves are being quickly shoved out the back door of the Comex to China, etc., as quickly and cheaply as possible. Previously normal supply-and-demand logic has been rendered completely irrelevant.
Here is the reality: oil, being the only currency backstop left (being real "money"), is therefore being amassed as rapidly as possible in lieu of precious metals for the upcoming global reset. What does current oil production mean toward global oil prices? Absolutley nothing for the moment. Global prices are, temporarily, merely being established by the ubiquitous central-banking money pump of 'hot' money into the commodities market.
commerce is now being done in bitcoins moron...stopped telling me "a currency collapse is imminent" when a virtual currency is soaring in value.
the virtual currency soars
til it lands.
I wonder if people will think that they have too much oil 50 years from now. ( Not really)
We are burning it like drunken sailors. Wait till we see the coming price that will crush the west like a bug. Some generation soon will be dealing with a very bad experience.
And with our new found "friends" in Iran and when those dickheads in Libya get their shit together,maybe the price of gasoline will stay below the $3.00 mark during next year's driving season.
It's next year's "voting" season America's leaders are most concerned about.
Indeed!
Also, as the author points out, the internal shenanigans in the oil market acount for a very high percentage of the price. Left to fundamentals, oil would drop rapidly to the $40-50/bbl range
Technically, the sentiment that the US is the only game in town regarding oil demand is fundamentally flawed.
Fundamentally, the sentiment that oil is getting cheaper to extract from the ground is technically incorrect.
i agree. yet the author does not claim this and this makes him look very smart relative to you (which in fact i think he is actually...at least in this case.) in other words "the US consumes 10 million barrels of oil a day...produces over 8 million barrels of oil a day...and imports 12 million barrels of oil a day." hmmmmm. perhaps you can figure out the math on that better than i can. WTI is clearly cheaper though! So indeed..."we have reached peak oil"...as in "peak consumption of oil"...and once you lose your demand for your product (cough, cough...Postal Service...cough, cough)...guess what...it never comes back...EVER. http://en.wikipedia.org/wiki/Salt_road sure...you can make the currency backing it worthless (cough, cough Roman Empire...cough, cough)...but salt never made a comeback. Imagine bringing Julius Caeser into "todays world" and have him watch while "zee Americans spread salt on their highways just to melt snow." Needless to say "this might free up a legion or two."
the military expolits of the US (and their lies surrounding them) tell you whether or not they are comfortable with the (and their) future of oil. It also tells you the true cost for us as well (not counting the hatred). The US imports a significant amount of its oil and the exporters will continue to export (and produce) less. The US (in 2013) is just 340 million people competing for the most precious energy source in the world..of 7 billion. And unlike much of the up and coming world economy, ours is desperately dependent on the impossibility of the price staying low.
As you say, it's just math.
some of the holiday driving fillups at < $2.99 this year thank you domestic oil and gas industry. thank you putin for stopping obama in syria.
bugs- I often hear people give Putin credit for the lack of war in Syria, but I think the single digit percentage of support from the American people also factored into it. Just my opinion, but either way, I prefer the 2.99 fill-up to a SNAFU war started by Mr. nobel peace prize.
Time to start a war.
Ways to kill the west. Start a war, spike oil = death of west
'Start' a war? When did the last one end?
Perhaps he meant a war where both sides have an air force.
Obama has the guts to do that?
that was my first impression too
the big ST conundrum : Will Oil rise or fall in 2014?
It all depends on real growth and real geopolitical tensions in MENA/South China.
what's your thoughts on Goldman's "give us your gold" trade vis a vis Venezuela?
I am against "Banning the Goldman Sachs Commodity Trading". Nobody is excluded in a Free Market. What a bunch of Socialist claptrap.
I am also against Government Bailouts of Goldman Sachs if they lose in Commodity Trading. They need be FREE to go BANKRUPT
Sorry Goldman really has to go sit in the corner until they begin playing well with others ,, until there are controls and regulations that keep them from being able to manipulate the price at will .. until we fire every single regulator and replace then with a crew that isn't looking forward to a cushy job right on the other side of the revolving door... and after we strip every last cent from GS and JPM that they stole from me and you through the various (thefts) bailouts.. and continue to steal at the rate of $85B/month.