February 5 … )
“As far back as I can remember I always wanted to be a gangster.” Henry Hill
Oil
DOE stats indicated a strong build in crude inventories last week, which is normal for late winter. They should keep building into spring maintenance and the shoulder, then fall in summer.
Crude prices fell again today, but I don’t think a random net build in inventories made much of a difference. Technically, WTI fell with trending OI and very light volume.
This next chart is a monthly declining wedge of WTI. The thesis: as prices trend lower, sellers become more and more aggressive, competing for buyers by lowering prices (T line).
The flat line at $65 per barrel is a level where responsive buyers have consistently entered the market at the bottom of the range. Usually, in time, sellers competing with lower and lower offers outsize the buyers at $65, and prices go lower. This wedge has been developing for three years. It can happen anytime now, imo.
Gasoline has been building inventories since early fall and should be at tank top now. Seasonally, gas inventories decline through summer and repeat the cycle in October.
None of this is terribly interesting, other than to underscore how well-balanced and well supplied things are in the US oil patch.
The most interesting market event in oil today was another slide and new low in the March April front spread. Prices are oversold, but the trends are so vertical that there is no sign of failure in the move yet. Dec Red Dec is down .70 this week from $3.00 high Monday to low of $2.30 cob today. The curve is soft.
If Trump were not president, I would think nothing of this little uptick in rotary rigs last week. But he is, so I’ll be watching Baker Hughes at 13:00 on Friday.
This next chart is total rigs in white with total crude production in blue. Barrels per day have continued to rise as rigs declined for two years.
If rigs trend higher, production will make new highs. The question is how much capacity we have to refine it. Exports have been steady in the low to mid 4 mm bpd level for 3 years. Overage would go straight into tank farms and the export market. I think the majors might like a contango market…
Next up: Gold traded a little heavy today. Stocks were a mixed bag on light volume. A curious copper rally. Bitcoin and the vibe…
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