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Crude Pumps'n'Dumps As Production Surge Trumps Inventory Draw
Following API's drawdown last night, DOE reported a significant 4.41mm barrel draw (dwarfing the 1.63mm barrel draw expectation). Thisis the 11th of last 14 drawdown in inventory. Crude spiked on the news, seemingly ignoring the 0.6% surge in production - its biggest jump since late May... but has given all the spike back now, hitting a $45 handle.
Inventories plunged...
Crude spiked...
but production surged...
and crude plunged...
Charts: Bloomberg
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Data doesn't matter.
Just print more oil.
I just can't believe, the idiot "policy makers" in this Country can't see what is happening here!!! Ohhhhhhh maybe they can, but where are the god damn American people on this???
We are being destroyed with the same script, WE WROTE in the 1980s, that brought down the Soviet Empire!!
Anyone who's studied "post gold reserve dollar economics" for 5 minutes knows that we essentially replaced the "gold standard guarantee" with the "petrodollar guarantee"! Which in a nut shell, ties most of the leveraged collateral of our fractional reserve banking and debt system to the price stability and affordable supply of oil and its related land and infrastructure assets, to one notion...........oil never goes down again!
Which wasn't good, but after the collapse of 2008, the idiots in DC decided the triple down on this notion, as the answer to all their bailout and fantasy job creation dreams, and leverage every government liability and related issuences to oil and gas production in the U.S. Lending trillions of dollars at cheap rates, for temporary job creation and fantasy GDP growth, and this was a no fail strategy of course because........oil would never go below $75 a barrel again, how could it??
From everything I can see, the whole fiat fantasy comes flying apart at $30 oil that can be sustained for 6-12 months! At $45, we are starting to see serious pressure building, everyone is waiting for the .gov answer, I don't think it's coming on this one!
Shearing the sheep with shaved pennies......
Looks suspiciously like the way Gold, Silver and the S&P are "managed"..albeit more time-compressed. Imagine if that "pump" didnt happen and it was all "dump".
so a 50kbbl/day production increase trumps a 4.4mbbl draw? The 50kbbl/day increase amounts to 350kbbl in a week which is less than 10% of the draw. Another way of saying it is that the production increase would require 12 weeks to cover the draw. Looks to me that mathematically speaking, the draw trumps the small production increase but that's just my view of it.
The current 4 week moving average is a drawdown of 2.6 million barrels per week. Last year at this exact time, the 4WMA was a drawdown of 4.3 million barrels per week. The first week of October, though, was when the serious increases in inventory began. We're still a few weeks from that, but maybe the market's just anticipating it?
Nice comment, but R2D2 no likee
I think when you look at production from Jan to April, the draw of the last several weeks is still not quite matching the production increase from Jan to April. From this weeks perspective you are right, but when you look at the longer term chart, I think the draw graph puts things in a different perspective.
They've done a good job discrediting peak oil.
I don't even bother discussing it anymore because people who have no clue just say look how cheap oil is now.
Since both numbers come out at the same time, I wouldn't describe it this way. I would describe it as short sellers attempting to kill any rally. Same as with gold which was promptly ass raped back down from 1090 this morning. If oil can't rise, gold won't.
That is awesome. Keep stacking WSR1 and store your oil. Don't give it away.
The more you produce,the less you have..Makes perfect sense to me..
Look at the inventory build the first 4 months of 2015. This was right after the price of oil dropped by about 50%. On what planet does that make any sense at all? Prices are cut in half and inventory consistently rises? It's bullshit. The oil price and inventories have been jacked around by financial douche bags.
As Chuck Prince said, "But as long as the music is playing, you've got to get up and dance".
The only way you can make those interest payments on your debt is by getting cash from selling oil. Sure, you need to take on more debt because you continue to drill more wells that cost more than the oil is worth...but that is a detail that doesn't matter...until it does (when the music stops - your credit is used up). It is no different than the housing bubble bursting. Banks didn't want to foreclose and take those losses. Instead, they extended more credit until ultimately the debtors couldn't even make the interest only payment. That was when it popped. The big difference thus far is that the banks/shareholders/creditors/investors haven't come up with a way to make the taxpayers pay for the oil and gas losses like they did with housing.
Anyway, the end result is that producers will continue to produce oil until they go out of business. They have to keep dancing. And, as the price of oil goes lower they have to keep dancing even faster.
The first round of lower oil prices put the companies with the crappy acreage and high debt load in serious danger. The problem for them (aside from struggling to make interest payments) was/is that no viable company really wants to throw them a lifeline and buy their crappy acreage. It sucked at $60 oil and it sucks worse at $45 oil.
Now that we are into this new round of lower prices we are really getting to the meat on the bone. Those companies with higher debt load and great acreage are starting to get in trouble. This is where the vultures get to take turns picking apart these companies and getting their assets for pennies on the dollar. I believe that once a few of these big players get sold we will start to see a rebound in the industry. However, it might take a while longer to wear down some of the bigger players to the point where they choose/have to fold. When you see the Continentals, Whitings, and Newfields of the world start to sell then I think we are nearing the end of this correction cycle. At the very least, that's what I hope.
Interestingly, Cushing inventory remains stubbornly at 81% of capacity. Last year at this time, Cushing was sitting at 25% of capacity. What happens when oil starts flowing down the streets of Cushing?
The equipment suppliers and oil field services companies have dropped their prices. E&P companies can put some pipe into the ground at lower costs.
http://fuelfix.com/blog/2015/08/05/franks-profits-slide-producers-ask-fo...
I've even heard a well-sourced rumor that one of the Chapter 11 companies intends to do some more drilling soon.
Oh please hurt me some more with low oil prices.