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Crude Inventories Surge To Record High As Energy Demand Collapses

Tyler Durden's picture




 

A month ago we highlighted the somewhat stunning reality of the real economy via the EIA's detailed energy supply and demand data. The key takeaway was  that we hoped this did not represent the true state of the economy since the data was so dismal. Fast forward to today and the DOE just released a much higher than expected build in crude inventories that took the stuffed-channel of oil products to all-time highs. The 395.3 million barrels is higher than the previous record in July 1990. There appears to be a number of factors at play - none of which are positive. There is a surge in supply due to the incessant harvesting of shale oil (which could have its own problems as we noted here). Second, we suspect there is a degree of 'channel-stuffing' occurring - if we pump it, they will buy - as producers and transporters are desperate to keep active and show incremental business (despite fading railcar loadings). But perhaps most important, as EIA data has shown, there has been a collapse in end demand for crude products not seen since the 1990s. Today's surge in inventories appears to confirm demand remains subdued at best.

 

 

Chart: Bloomberg

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Wed, 05/01/2013 - 11:43 | 3518125 derek_vineyard
derek_vineyard's picture

i better quickly quadruple my long spx

Wed, 05/01/2013 - 11:43 | 3518139 Cult_of_Reason
Cult_of_Reason's picture

Cramer said it is very bullish.

Booyah!

Wed, 05/01/2013 - 11:45 | 3518156 New England Patriot
New England Patriot's picture

This must mean prices will go up.

Wed, 05/01/2013 - 11:46 | 3518171 Cult_of_Reason
Cult_of_Reason's picture

It means buy stocks, "Bear Stearns is fine".

Wed, 05/01/2013 - 11:57 | 3518217 Curt W
Curt W's picture

"Thats just silly"

Wed, 05/01/2013 - 12:05 | 3518266 Cult_of_Reason
Cult_of_Reason's picture

"Buy in May and it's okay"

Wed, 05/01/2013 - 12:50 | 3518481 somecallmetimmah
somecallmetimmah's picture

Rhyming: Is there *anything* it can't fix?

Wed, 05/01/2013 - 13:21 | 3518646 AssFire
AssFire's picture

NOT surprised! It is evident since Feb. here in Houston- nothing being built- OTC next week will be interesting.

Wed, 05/01/2013 - 12:11 | 3518312 espirit
espirit's picture

Sooo... Energy demand goes down, inventories go up.

Applying this theory to Gold, demand goes up and inventories go down.

In the first case price should go down, and in the second price should go up.

The new normal suggests re-writing of supply/demand history, and results are now given as matrix metrics.

 

 

Wed, 05/01/2013 - 12:15 | 3518339 New England Patriot
New England Patriot's picture

Think of it like water (liquidity) flooding the compartments of a ship: lots of stuff inside the boat starts floating... until the boat sinks and drags it all down.

Wed, 05/01/2013 - 12:37 | 3518423 fourchan
fourchan's picture

omg thats the best analogy of the year.

Wed, 05/01/2013 - 13:14 | 3518610 Rory_Breaker
Rory_Breaker's picture

+ 1 trillion (or whatever liquidity QE4EVA manages to flood the system with)

Wed, 05/01/2013 - 12:01 | 3518255 disabledvet
disabledvet's picture

Exactly. The chart says oil but the headline "energy." you have to have a 101 understanding of economics to understand "demand for energy is unlimited" but when I comes to oil "there are substitution effects." the problem of course is that Government...or Detroit I guess...doesn't want the oil price to "be allowed to collapse." WHY? If it's cheap enough demand will soar....unless of course the substitution is so valuable it makes oil...worthless.

Wed, 05/01/2013 - 12:10 | 3518288 FieldingMellish
FieldingMellish's picture

Saudis need the oil price to climb at least as fast as their domestic inflation rate in USD terms (5% currently). Baring short-term tactical fluctuations, they will continue to be the only major producer worldwide with pricing power (taps on/taps off) and thus control prices regardless of US inventory levels.

Wed, 05/01/2013 - 12:34 | 3518424 PMakoi
PMakoi's picture

Oil for gold.  Gold for food.  BIS is getting too complicated.

Wed, 05/01/2013 - 15:35 | 3519364 Citxmech
Citxmech's picture

Disabledvet - if the POO were allowed to collapse - all those expensive tar sand/bitumen projects would have to be shuttered.  Price-fixing the POO is designed to ensure continued access to the spice for the mid-term - or so seems to be the plan.

The problem is, with all the cheap-stuff gone, society is going to need to be retooled for an "expensive energy future" (aka a contracting, more localized system - which will fuck the hell out of the bankers as debt-issued, fractional reserve fiat money doesnt work in an economic system in terminal decline).

Wed, 05/01/2013 - 16:15 | 3519550 DaveyJones
DaveyJones's picture

so true

this is the most important oil story going on

http://www.theoildrum.com/node/9946

Wed, 05/01/2013 - 13:02 | 3518543 MarsInScorpio
MarsInScorpio's picture

FieldingMellish:

 

Please allow me to respectfully suggest you rethink your conclusion.

 

The reality is that you will eventually come to a point when there is no viable storage left for stuffing. There comes a point when price has to drop because there are no longer buyers willing to serve as money-losing storage facilities just to accommodate the OPEC regimes.

 

Even the OPEC regimes can only stuff so much on their territory.

 

And then there is the continuing crisis in shipping. If no one is buying, then ships will sail in circles to keep the barnacles off the hull. More money lost.

 

What is all gets down to is the disconnect between where Ben’s helicopter is flying, and where he should be dropping dollars.

 

By pursuing his “wealth effect” strategy, all he is doing is giving dollars to people who don’t spend them on consumer items. Instead, their gambling instinct takes over, and they hit the rigged casino collectively known in common parlance as Wall Street.

 

Add in the insanity brought about by HFT, and you can quickly see why two things are occurring:

 

1)  The S & P climbs regardless of reality because the money is going to the gamblers and not the consumers.

 

2) Inflation is not going into hyperspace because consumers do not have too many dollars chasing too few goods. This is why you aren’t seeing the Weimer Effect; if all those dollars were hitting wallets instead of fund accounts, the hyperinflation you keep expecting to see would, in fact, occur.

 

Reality is that this is the Second Great Depression – why this is not labeled as such escapes me except by saying that A) the MSM and the talking heads of media, government, politics, and finance don’t have the guts to tell the truth – or else they don’t understand it (which is where my office pool money is going) – and B) because that label doesn’t fit well with a narrative that the economy is in recovery, and, as pronounced today by the AP, this downtick is just a “soft patch” that we are experiencing now.

 

Of course, that is a lie. If ZH is irreplaceable for no other reasons, it is irreplaceable because it relentlessly exposes the lies with hard-core data, primarily in chart or other comprehensible graphic format. ZH, and when its posters are being serious instead of sarcastic, is probably the most valuable source of comprehensive economic information available today.

 

So there you are. Eventually you can only stuff so much until you run out of room. Lower prices aren’t producing reflextive demand because the consuming 99% is busted broke. It really doesn’t matter how cheap it is if you don’t have the money to buy it.

 

What this means to all of us is that we need to act in the reality that we are in The Second Great Depression, that eventually demand will fall so low that you can’t stuff enough, or terminate employees enough, or print money enough, before it collapses.

 

Buy physical PMs, stay alert for signs that the government is getting ready to steal your assets, stay off the radar as much as possible, and keep reading ZH.

-30-

 

Wed, 05/01/2013 - 13:46 | 3518778 Taint Boil
Taint Boil's picture

 

 

Um, sir … we usually only write broken and fragmented sentences here and most of the time containing belittling code words referencing Obama or Jews and the such …. Are you sure you are on the right website?

Wed, 05/01/2013 - 14:56 | 3519187 Doctor of Reality
Doctor of Reality's picture

He's correct IMHO. When I'm in a rush, I zip past the "funnies" to find the posts with detailed analysis. After awhile, it's easy to tell the bullshitters from those willing to debate and learn. I like to learn and apply what I learn. This site has helped me a great deal in learning about the true state of the economy... amoung other topics.  

Wed, 05/01/2013 - 14:24 | 3518992 purplefrog
purplefrog's picture

Dang!  Well said, MarsMan, well said!  It for posters like you that I put up with the crap.

Wed, 05/01/2013 - 15:19 | 3519290 JimS
JimS's picture

Mars, well written. Kudos, to you.

Thu, 05/02/2013 - 08:16 | 3521726 e-recep
e-recep's picture

"ZH, and when its posters are being serious instead of sarcastic, is probably the most valuable source of comprehensive economic information available today."

Ouch, that hurt.

Wed, 05/01/2013 - 14:29 | 3519029 steve from virginia
steve from virginia's picture

 

 

 

What matters is access to credit ... If peeps cannot afford oil they can't buy it.

 

Credit collapse = no oil.

Wed, 05/01/2013 - 17:46 | 3519895 Nassim
Nassim's picture

FieldingMellish,

You are absolutely correct, and that is why the Saudis are behind all these efforts in the Middle East to destroy production: invasion and destruction of Iraq, Iran sanctions, Libya overthrow of Gaddaffi and currently the Syrian embroglio.

Wed, 05/01/2013 - 11:45 | 3518165 camaro68ss
camaro68ss's picture

My 68 Camaro is coming out this weekend. I love me that 8 miles per gal

Wed, 05/01/2013 - 12:01 | 3518242 Saint Pitbull
Saint Pitbull's picture

Don't think that this is going to translate into sharply lower prices.

The lack of refinery capacity (due to regulations) guarantees that one of the primary beneficiaries is ... gov't.  Watch for some new taxes and no one will notice.  shhhh

Wed, 05/01/2013 - 12:13 | 3518306 WarHorse
WarHorse's picture

YOu are definitely NOT a student of our existing enegy complex.  There is no longer a shortage of refinery capacity in this country.  Do a little research and you will find I am correct

Wed, 05/01/2013 - 12:13 | 3518307 Rustysilver
Rustysilver's picture

Saint Pitbull,

You may know a lot more about refinery capacity than I do, but I don't buy it.  I would like to know about refinery throughput and has it improved over last 20 years.

Than I would agree with  you.

Wed, 05/01/2013 - 13:34 | 3518737 marathonman
marathonman's picture

There have been incremental and massive refinery expansions over the last decade.  Marathon Garyville refinery basically doubled an already large refinery in 2011.  Motiva in Beaumont spent billions to double their capacity but botched the startup in 2012 and dissolved their feed piping, exchangers, and brand new crude tower.  I think the restart of the new crude unit is soon.  In the meantime several refineries in New Jersey and Pennsylvania have shuttered recently due to lack of access to cheaper WTI and even cheaper Canadian syncrude.  They were stuck having to buy Brent and paying 10-20$/bbl more to make gasoline that would not compete cost wise with WTI.  And so they went tits up.

Refinery capacity is just fine.  It's easier to expand capacity of existing facilities than build grass roots and deal with the NIMBY head aches and enviro Nazi regulators.  Believe it or not, there is a somewhat free market in refining.  Right now refiners with access to WTI and Canadian syncrude are going gang busters.  Check out HFC, MPC, CLMT, VLO, and PSX.  They are rolling over at the moment though....

Wed, 05/01/2013 - 14:02 | 3518842 RockRiver
RockRiver's picture

Not to mention the huge expansion in progress at BP's Whiting Indiana plant. Eventually capacity at Whiting will be doubled and will run both canadian sour and various light sweet grades of crude.

Wed, 05/01/2013 - 12:03 | 3518244 Manthong
Manthong's picture

8 miles per gal

you are obviously an envionnmental whacko.

the 409 in my 79 TA is nowhere near as frugal   :-)

Wed, 05/01/2013 - 12:03 | 3518273 de3de8
de3de8's picture

Must be a big block or pulling low gear or both.

Wed, 05/01/2013 - 12:28 | 3518387 Manthong
Manthong's picture

bored 409 ci…Holley double pumper..  Hookers,    3:42 rear   more..

Standing next it to at idle is a religious experience

Breaking the rubber loose is … use your imagination   :J

Wed, 05/01/2013 - 12:49 | 3518467 Scro
Scro's picture

But can you lift the front wheels at 170 mph? Hayabusa baby.

Wed, 05/01/2013 - 12:55 | 3518507 Manthong
Manthong's picture

geez.. No way..

I like to savor that out of the gate rush.

Wed, 05/01/2013 - 14:59 | 3519212 Doctor of Reality
Wed, 05/01/2013 - 12:15 | 3518336 azzhatter
azzhatter's picture

You will need to report to a re-education camp #473. Excessive oil consumption is unpatriotic (unless in a Bently driven by an oligarch obama supporter)

Wed, 05/01/2013 - 12:44 | 3518447 STP
STP's picture

Long live American Muscle!  The 74' Corvette Stingray came out to play last night and it doesn't get much better mileage than the 'maro.  The four speed car, runs a double pumper with mechanical secondaries and it likes nothing better than driving your foot, deep into the floor.  While the kids play car games on Xbox, there ain't NOTHING like the real deal!

Wed, 05/01/2013 - 13:13 | 3518606 somecallmetimmah
somecallmetimmah's picture

"My 68 Camaro is coming out...8 miles per gal..."

Is that secret code for...ah, never mind.

Wed, 05/01/2013 - 11:48 | 3518162 Aeternus
Aeternus's picture

Is goldman short yet? I need to know so I can go long /QM.

 

http://www.youtube.com/watch?v=deuC8GPr31A

Wed, 05/01/2013 - 12:27 | 3518382 Ruffcut
Ruffcut's picture

I think they are counting the oil reserves sunk on the bottom of the gulf, too.

I still see many driving around in circles. NOthing burger story about a nothing hot dog economy.

Wed, 05/01/2013 - 11:41 | 3518130 TahoeBilly2012
TahoeBilly2012's picture

Fire up the V 8 again!

Wed, 05/01/2013 - 12:33 | 3518419 somecallmetimmah
somecallmetimmah's picture

I've heard shaving your cat is recomended by the EPA.  Less wind resistance, you know.

Wed, 05/01/2013 - 11:45 | 3518135 Cdad
Cdad's picture

Indeed.  Falling demand for energy has been apparent for years...and yet by some mysterious force [eh hem...thanks Ben], the gas pump pain continues.

Fabulous thing...this crony capital Banana Tree Republic America.  

Wed, 05/01/2013 - 11:49 | 3518175 Smegley Wanxalot
Smegley Wanxalot's picture

No pain, no ... uhhhh ... gain. 

That's what I heard once.

Wed, 05/01/2013 - 12:04 | 3518275 duo
duo's picture

Obama said he would cut carbon emissions by 15%.  That's pretty easy to do if you contract the economy by 15%, which has happened in real (non BLS) terms.

Wed, 05/01/2013 - 11:44 | 3518144 Cursive
Cursive's picture

I don't see as much traffic in my little town.  Seriously.  Also notice that the main drag has been suspiciously (and welcommed) quiet at all times of the day.  Today being the first day of the month, I was thinking we might have an SSA/EBT-induced traffic pick-up, but ain't seeing it yet.  The quiet is very nice.

Wed, 05/01/2013 - 11:47 | 3518174 camaro68ss
camaro68ss's picture

Lucky, I've had a slight up tick in traffic here in Silicon Vally.

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