[mikelets456]

What’s going on with the oil market? Is it because our dollar is so strong? Or because people are using far less?

[Attention Surplus Disorder]

As one who invests and trades in oil and natural gas, as usual, there is not just one thing going on with either one. With regard to Natural gas, this is a an Exquisite lesson in Market dynamics and the Dynamics of "old news". About 8 weeks ago, the news was that the world was experiencing a horrific natural gas shortage, most especially Germany, and New England. What I find interesting is, that New England is certainly experiencing a LOCALIZED natural gas shortage that is impacting the price of natural gas in that particular area quite drastically. That is because the infrastructure necessary to deliver gas to New England is very narrow. And yet producers of natural gas, which is measured by the amount in storage in the Midwest, have responded by producing massive amounts of natural gas. This is critical to understand. As measured by the amount in Midwest storage, natural gas is only 2% short of historical levels. It is very short in New England but that is not where the market measures and prices Natural Gas consumption. Very interesting, at least for me.

a similar Distortion-generating fashion, Germany appears to be in serious short supply. But as it happens there are a dozen tankers full of LNG sitting offshore for europe, there simply are not the facilities to unload them, at least not fast enough to top off their storage figures. The gas is there, maybe not in huge surplus, but I believe the stories of Germany freezing to death are badly exaggerated. But those grim storage figures in my opinion create a false impression that Germany is in horrible shortage. This whole dynamic is very instructive, it shows how relying on old news creates false impressions. Stated differently, it shows how getting to the party late and getting all bullish on natural gas (NOW) can be hazardous.

As for crude oil, we are seeing prices decline somewhat. When was the last time we saw oil under $80? The action in oil, meaning oil stocks, appears to be centered more in the refiners rather than the producers. Look at Valero VLO.