Oil Prices Fall(Surprise inventory build)

money.cnn.com ^ | staff

[kellynla]

[FreedomPoster]

It will be fun to watch all those surprised by that, among the Usual Suspects.

[kellynla]

[Dead Dog]

Is that cost, or price? I know they have it marked as price, but that 4% seems like it would be variable..widely.

The situation we have now is a good example. There is ample crude available, inventories have been high for the last six months. There is no supply problem. What we have is high demand vs. supply of gasoline, hence the auction price bought by distributors is high, and demand at the pump is relatively high.

[midnightson]

Here in Western Alaska we pay $3.90/gl-- it has to be barged in the summer- the price stands until the next year-- people are holding their breath for this first barge which is due in a month- it's the heating oil that will do people in-

[fhlh]

...hedgefund managers making millions on oil futures (and using any comments out of Iran as an excuse to do so)

[kellynla]

well ya got half of that right...ya just forgot to factor in the DEMAND...which historically rises with folks driving Memorial Day weekend and throughout the summer months on vacations...

[fhlh]

ditto.. I live in Houston, if I drive a motorcylce to work I will die... no one "sees" riders in this town... too busy making that all important cell phone call.

[Wristpin]

"hence the auction price bought by distributors is high"


Who gets the money when the Saudi's produce a barrel of Crude for $6.00 and sell it for $75? Auctineers, speculators, the Saudi's themselves, Oil Companies?

[Go Gordon]

And people like me are driving less.

And most of the Mid-Atlantic states haven't used their boats for a week due to strong NE winds

[RightWhale]

Heating oil is over $2 now. That would be in bulk. What it is when it is parceled out at retail would be more, and special shipping to the bush on top of that. My neighbor's last delivery last winter was $2.51 and that is in Fairbanks.

[thackney]

From memory, but it looks like I was pretty close. The actual ratio of fill to world demand is even lower.

Total World Oil Demand = 83.62 in 2005.
http://www.eia.doe.gov/emeu/ipsr/t21.xls
Energy Information Administration

In April 1.8 million barrels were added to the reserve, May was scheduled to be 1.7. That averages to 0.057 million barrels a day.
http://www2.spr.doe.gov/DIR/SilverStream/Pages/pgDailyInventoryReportViewDOE_new.html
STRATEGIC PETROLEUM RESERVE INVENTORY, SPR OIL MOVEMENTS

[thackney]

Bush just suspended that late last week. It would not have made a difference in the timeframes we are talking about here - it takes time for refineries to adjust to such rule changes.

But you can immediately buy imported gasoline from other stocks.

[Go Gordon]

You still have not answered the underlying issue here - why did gasoline inventories RISE 2.1 million barrels when analysts thought they would DECLINE 700,000 barrels? That's means the analysts were 2.8 MILLION BARRELLS off in their estimates - or about 33 percent of daily gasoline consumption. In other words, over the course of one week, refineries would have to have produced about five percent more gasoline each day than was being used - not the indication of a tight market like we saw with Katrina. IMO someone has been underreporting inventories to help jack up the futures market.

Dude, as the price of gas hit $3 a gallon people started driving less. Heck, over the course of one weekend, the inventories can swing the amount quoted. One bad weather weekend along the east coast and beach-goers and boaters stay home (just one example).

[kellynla]

"Is that cost, or price?"

"What We Pay"(March 2006)



"There is no supply problem."

Quite the contrary, the world demand is 85 million barrels a day while there is only 87 million barrels available(of which includes Saudi crude which from what I understand is not easily refined to gasoline)


Global demand is expected to average 85 million barrels per day in 2006, leaving just 1.9 million barrels per day of excess production capacity that could be called upon in an emergency, according to Cambridge Energy Research Associates.

[rhombus]

Thanks, good stuff.

[trubluolyguy]

ya just forgot to factor in the DEMAND...which historically rises with folks driving Memorial Day weekend and throughout the summer months on vacations...

---

And when gas prices hit 4 and 5 dollars a gallon, what do you think that is going to do to demand?

[thackney]

And looking at your charts, I don't see the import spike you mentioned anyway

Click on the link
Gasoline Production and Imports (Million Barrels per Day)

4th black bar is "Gasoline Imports"
Week ending 04/14/06 was 0.907 million barrels per day
Week ending 04/21/06 was 1.338 million barrels per day

[PeoplesRepublicOfWashington]

God bless you, dirtboy. You've solved one of the biggest economic problems of our time. Quick--report your findings to the White House. The evil-doing gas price manipulators will be prosecuted to the fullest extent of federal law and gasoline will once again be priced at a fraction of a dollar per gallon. There is certainly a Medal of Freedom for you in the near future for your ingenious devotion to your country's welfare.

[dirtboy]

Thanks, I was looking at the wrong part of the chart.

Two things - first of all, that was before the time period in question, and second, it was before Bush suspended reformulations. And third, tanker traffic is monitored by analysts, so they would have an idea that more tankers are inbound and could work that into projections.