US Crude Oil Inventory Report

The Sept NYMEX crude oil contract closed at $114.98, up from $114.52 the day before. Every bar component made a higher high, including the high of the day itself $$117.03 from $116.65 the day before). Market News notes that yesterday was settlement day for the Sept contract and that contributed to roller-coastering. Also, analysts name the US inventory report and tension with Russia, as though Russia wants to make less money from oil just to punish the west for setting up a missile shield in neighboring country Poland. We find the “geopolitical” story about Russia unconvincing. It’s on a par with Iran impoverishing itself and risking domestic unrest by halting oil shipments through the Straits of Hormuz.

Yes, politicians can be irrational but they are not usually totally stupid.

The US inventory report is more important. It showed gasoline stocks fell 6.2 million barrels last week when 3 million was forecast, meaning refiners are running slower now that demand for gas is lower (about 1.6% from a year ago). Oil inventories rose 9.39 million barrels to 305.9 million barrels, the biggest gain since March 2001. It’s not at all clear why a big rise in stocks did not cause the price to fall with any lasting effect. Prices did fall right after the report, but they failed to stay down. We think that means there are some determined buyers out there… or the refinery inventory adjustment is a more powerful story.

Bye for Now

Barbara Rockefeller