...the U.S. government admits that crude oil inventories are at 7 year record high – with 343 million barrels of oil stockpiled in the U.S. alone!The Energy Information Administration (EIA) has a chart based on official statistics gathered from the U.S. government showing, indeed, we do have 343 million barrels of oil stockpiled:
However, I would point out last year at this time, we had about 333 million barrels of oil stockpiled and those stocks moved lower until October. Meanwhile oil prices moved from $57 to $70 in September and back to $56 in November, intuitively opposite expectations based on stockpiles. I am not impressed with that analysis from NewsMax.
I really have to question that statistics. How is it possible that we have been able to build our inventories when so much of our oil production capacity was damaged or destroyed by Hurricanes Katrina and Rita and is still not back on line. Has our government been buying oil on the open market, over and above our lowered production, raising the price of oil and causing gasoline prices to go up?
I don't buy it. How can we have higher oil stockpiles? Didn't we tap into the strategic reserve recently? No, I suspect that the numbers may be wrong. Like so many of the statistics that come from the government anymore, they lie, they spin, they revise later. Why would the government overstate the stockpile? If we knew the real numbers we might conclude that oil prices are going to go to $100, that could filter through the economy, giving us higher inflation numbers, causing long bond rates to rise and force the FED to keep raising short term rates, killing housing and consumer spending.
The EIA's report This Week in Petroleum says three factors influence the price of oil
Demand -
After averaging annual growth of just under 1 million barrels per day between 1991 and 2002 (under 0.9 million barrels per day for 2000-2002), world oil demand grew by 1.5 million barrels per day in 2003, 2.6 million barrels per day in 2004, and at least 1.1 million barrels per day in 2005. This greater-than-historical growth came even as oil prices more than doubled. In fact, some analysts argue that strong growth in the world economy, and particularly in China and the United States, has fueled the need for more oil, thus putting upward pressure on prices. That is, strong global oil demand is one of the factors causing oil prices to rise in recent years.Surplus Production Capacity -
While some productive capacity has been brought online, it has been insufficient relative to demand growth. As a result, surplus capacity is extremely limited, dramatically reducing the ability to respond to any sudden surges in demand or disruptions in supply.Weather and Geopolitical Risks - We are about to enter the Hurricane season and the world gets so much oil from unstable areas; Nigeria, Iran, Iraq, Venezuela. The danger is rising not falling.
I said it before when I saw the NewsMax advertisement. We will never see $40 oil again! I hope I'm wrong.
NewsMaxEnergy Information Administration This Week in Petroleum Oil Iran
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