Wednesday, December 21, 2011

Just How Big Was That Decline?

Link here.
Crude futures jumped Wednesday after a government report showed a giant decline in U.S. oil stockpiles.

The U.S. Energy Information Administration said U.S. crude inventories fell by 10.6 million barrels last week, the largest weekly drop in more than a decade. Analysts said a portion of the decline is due to refineries looking to cut costs at the end of the year, but the size of the drop still raised concerns about rising demand.

"A 10-million-barrel draw in crude inventories is massive," said Peter Donovan, vice president and broker at Vantage Trading in New York. "Guys on the floor were definitely taken aback."

Crude stocks often fall at the end of the year as refiners and other companies cut excess supplies to reduce their tax burden. But the size of the drop topped estimates that had called for, on average, a 2.4-million-barrel decline.

Analysts at BNP Paribas said about half of the reported decline was due to a drop in U.S. imports that forced refineries to draw on stockpiles to keep up with foreign demand.

U.S. crude stockpiles have fallen by more than 45 million barrels from a 2011 peak of 369 million barrels in June. Demand for fuel products globally has prompted domestic refineries to churn out diesel for export to Europe and developing markets, such as Brazil.
In addition, the demand for diesel in the Bakken is setting records on a regular basis. 

But is there something else going on? When analysts expect a 2-million-barrel decline and it ends up being a 10-million-barrel decline and analysts can't explain it, it gets real interesting, real fast.

The price of WTI continues to "melt up." Futures show oil up another 16 cents after rising about $4 in the past two days.

This is what I find most interesting: the big jump in the price of oil was Tuesday, a day before the numbers were released; today, the decline was reported, the jump in oil price was significant but not as big as it was the day before. Interesting.

Here's another link confirming this was a HUGE decline

2 comments:

  1. and insider trading doesn't exist.....

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  2. Yeah, I assume as the numbers are being put together the day before they are released, there are a lot of phone calls / e-mails being made, and folks are connecting the dots.

    The real big surprise: in the big scheme of things, the jump in price of oil was not all that big considering the huge drop in the inventories, and the surge in "new home-building" (although that was mostly apartments). The crisis in Europe is putting a huge damper on the markets.

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