Updates
April 14, 2014: this news is very interesting and it's hardly getting any attention today. Investing.com is reporting:
The euro slid against the dollar on Monday after data revealed U.S. retail sales beat expectations last month, driving hopes that U.S. recovery may be gaining steam after a rough winter disrupted commerce.
The Commerce Department reported earlier that U.S. retail sales rose 1.1% in March, exceeding expectations for a 0.8% gain. Retail sales in February were revised up to a 0.7% increase from a previously estimated 0.3% rise.
Core retail sales, which exclude automobiles, rose 0.7% last month, beating expectations for a 0.5% reading, after a 0.3% gain in February.I missed the 30-second sound bite on the radio, but this was said to be the highest month-over-month gain in months? years? Are we looking at a potential economic explosion on the upside?
Original Post
From Yahoo!InPlay: Crude oil extended yesterday's gains following bullish gasoline inventory data. The EIA reported a build of 4.030 million barrels in crude oil inventories for the week ending Apr 4 when consensus called for a smaller build of 0.8-1.3 million barrels.
However, gasoline inventories had a draw of 5.188 million barrels vs expectations for a draw of 0.7-1.0 million. The energy component lifted from its session low of $102.37 and brushed a session high of $103.77 before settling with a 1.0% gain.Okay, so the WTI oil inventories build was four times what analysts expected (4 million bbls vs expectation of 1 million bbls) and WTI oil surges another one percent, to close over $103.
Regular readers know that I am very, very disillusioned with the economic recovery, or should we say, economic non-recovery. The headlines regarding economic indicators don't give me a warm fuzzy. A huge new tax (ObamaCare) right in the middle of a recession was absolutely the wrong thing to do.
But consider this. Could the economy explode? That is, could the economy move out of its current doldrums into something headier than any of us can imagine? I'm not necessarily suggesting that every economic indicator will all of a sudden surge over the next few months, but once things start to turn, could things move a lot more quickly than folks imagine? One truism: it seems "we" are always surprised where we least expect it. And the last thing I expect: a surging economy this summer.
There was a great line in Sylvia Nasar's book, Grand Pursuit: I forget who it was, it might have been Keynes -- but great thinkers at the time, including men of Keynes' stature never even imagined WWI breaking out. Their economic theories suggested countries were too interdependent to even consider going to war against each other. Keynes (or whoever it was) continued living like he always had, not even thinking about the likelihood of war. The point Ms Nasar was making (and Donald Rumsfeld has made the same point), it is often that things we were not even considering happen, taking everyone completely by surprise.
Go back to the story above, about the oil build. The oil build is four times what was expected, and yet the price of oil continues to surge. Two days ago I completely discounted the global economy. Maybe I was wrong.
The oil build was four times what was expected, but look at the gasoline draw (remember, the US exports gasoline and diesel to Europe). The gasoline draw was five times expected: five million bbls vs an expected one million bbls.
I don't know if these graphs which I just pulled down, are current enough to include this most recent data. But look at the graphs. The first one is "US gasoline demand."
But this graph is even more striking:
I've followed this metric almost ever since I began tracking the Bakken. I've never paid much attention to it: the number of days has always been in the 22 - 24-day range it seemed (except during the winter). But look at the trend.
Here are the crude oil stocks (rounded to the nearest whole number), in millions of bbls:
- current week: 1,080
- previous week: 1,076
one year ago (2013): 1,085 - two years ago (2012): 1,061
Throwing this out on the table for discussion, perhaps I was wrong earlier this week, when I said the recent rise in the price of oil had nothing to do with the economy.
The oil industry is made up of some pretty savvy CEO's -- I'm thinking of XOM right now. I can't imagine they would be building oil stocks -- yes, I know, the shale revolution has moved more quickly than some imagined, and it might be out of their control to some extent, but that's a pretty healthy increase (1,061 to 1,080) if they thought the economy was about to turn negative. The oil stores/pricing story has me confused, but that's that. It is what it is.
Now, back to gasoline. Back to that spectacular down-trend in the second graph. Remember these four data points: a) oil stocks going up; b) refinery utilization at 92%; c) more oil arriving daily from the BPEF; d) gasoline at more than $4.00/gallon in California.
Every fiber in my body suggests that eight weeks from now it will be "the same old thing" -- the economy still in the doldrums. But when the gasoline draw is five times what was expected, and the trend line for gasoline demand and the trend line for days of gasoline supply are that sharp, it gives me pause.
As long as I'm rambling: the Fed minutes were said to be the reason the market surged today. First, of all, the tea leaves suggested this is what the Fed would do. This should not have been a surprise. If it was a surprise and the surprise resulted in a the stock market surge, I'm disillusioned with the analysts and the traders. "Everyone" knew that the new Fed chairman was not going to spoil the party. Even I knew that, and had blogged along those lines for quite some time.
What if the movers and the shakers see a US economy the rest of us (i.e., me) are not seeing?
Before you say, "but," one last comment: the mid-term elections are but a few months away. We are now entering the mid-term election cycle. ObamaCare, the biggest new tax increase since social security is already baked into the market. Is the American economy like the surfer, just getting ready to mount her surfboard at the top of the pipeline?
Waitin' for a big surprise?
The granddaughters will be surfing this summer at Huntington Beach, CA.
*****************************************