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Why Is Crude Oil Ignoring U.S. Inventories?

Published 05/19/2022, 11:28 AM
Updated 05/14/2017, 06:45 AM

While the current pull-back on black gold is fundamentally triggered by different forces, where is the prevailing wind coming from that is pushing prices lower?

On Wednesday, the day after Fed Chair Jerome Powell showed a more hawkish tone, crude oil prices dropped 2.5% following profit-takings on most commodity markets. New fears emerged that a world economic slowdown combined with rising interest rates could negatively impact the global demand.

United States Crude Oil Inventories

The commercial crude oil reserves in the United States unexpectedly dropped in the week that ended May 13, according to figures released on Wednesday by the US Energy Information Administration (EIA).

U.S. crude inventories have decreased by almost 3.4 million barrels, which implies greater demand and would normally be considered a bullish factor for crude oil prices. However, it appears that with the Federal Reserve’s sustained hawkish tone, which contributes to pushing commodities to the lower side, the market does not pay as much attention to US crude inventories, which are relegated to the background…

Crude Inventories Chart.

(Source: Investing.com)

Crude Oil Futures Daily Chart.

WTI Crude Oil (CLM22) Futures (June contract, daily chart)

United States Gasoline Inventories

On the other hand, some additional figures extracted from the same EIA report were released:

These are U.S. Gasoline Reserves, which plunged by almost 4.78 million barrels over a week, while the market forecasted a decline of only 1.33 million barrels.

Gasoline Inventories Chart.

(Source: Investing.com)

Gasoline Futures Daily Chart.

RBOB Gasoline (RBM22) Futures (June contract, daily chart)

Consequently, despite demand for black gold, which nevertheless remains at a high level according to the two above figures, crude oil prices continued to slide on Thursday. They proceeded with their decline from the previous day, still dampened by fears of a global economic slowdown.

The possible easing of U.S. sanctions against Venezuela could be considered another bearish factor, coming in addition to the Hungarian veto on the EU’s plan to ban Russian oil. The European problems didn’t stop there, as Turkey opposed the opening of talks on the NATO membership extension to Finland and Sweden after the two Nordic countries submitted a formal application.

The current situation of Hungary is quite understandable, since the central European country is particularly dependent on Russian hydrocarbons.

Latest comments

4/15/22, switch to summer blend which always leads to increased volatility +/- on inventories and raises the price at the pump. No worries, summer blends are more efficient but .07 per litre added to already high prices exacerbates th problem. Oil supplies will correct themselves, assuming our socialist party, oops, free markets don't work under socialism...Let's go Brandon!
And for all millennials and generation Z, just so you know, 0% interest rates and unlimited QE is not normal. I understand that’s all you’ve grown up with. But what makes a market and what values a stock or a company is fundamentals and earnings. So that’s where the market became lost and jaded. The Fed put is completely dead and buried forever. Nothing can stop them. You can’t in fact, to combat hyper inflation or inflation. You have to raise the fed funds rate above the inflation rate. Look up volker 1980. You have to have the bravery to do it. I don’t know if Jerome has that. And all the crybabies on Wall Street can’t handle it because they’ve never seen it before. Well it’s coming. 5 to 7% fed funds rate is normal. At 10% 30 year mortgage is normal. What we have now is not normal. It’s the matrix. So everyone take the red pill come back to reality.
SJT CRK AMPY EGY. Those four stocks right there are best in breed for small and midd cap energy companies. I could put down another hundred stocks that you will do incredibly with. Forget about technology and all that garbage. Forget about Memes forget about the Momos. Forget about everything in the market did from 2009 till 2022. That was a Maroge. I told everyone and it’s well documented on Twitter going back to 2011 2012, that this will end horrifically this experiment. But nobody wanted to listen. Well everybody’s listening now. This will take years. You will have inflation for years. So be smart, get into energy energy and more energy stocks. Chemical companies commodities and materials and insurance carriers. And have protection in the form of puts. You’ll make a bundle.
Finally back to a market that is so much easier to maneuver. Again I wouldn’t expect you to understand this if you’re less than 45 years old. What everyone just witnessed was a 15 year failed federal reserve experiment. What you just witnessed is fantasy land. It will never ever ever ever happen again. And there’s nothing the market can do. You can fall another 30% and the fed still has to be massively ultra aggressive. And we haven’t even talked about the 9 trillion on the balance sheets. I mean this was pure fiscal insanity this experiment. Again I will not expect you to understand any of this unless you’re 45 or older. And I’ve lived through two or three decade cycles in the market. This is a once every hundred year super cycle for oil. You buy as much energy equities as you can and especially SPY puts. Very simply $220 a share times 15 X equals 3300 on the S&P. And that has been extremely generous with S&P earnings. It’s probably more like $210-$215 per share times 15 max.
Don’t worry about it one bit. You have an administration who has waged war against fossil fuels. That’s the only tell when you need but oil has about 100. I will guarantee you we are just in the first inning of a super cycle for oil. $150-$200 a barrel is coming. On top of that energy companies were dead money for 15 years for all you millennials. Their balance sheets are perfect and they are so cheap the smaller and MidCap energy companies it’s unbelievable
Ignored because they don't count the ships sitting outside the ports no one will buy bc prices are too high and everyone knows the rug could get pulled any day
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