Oil Prices Fall(Surprise inventory build)

money.cnn.com ^ | staff

[kellynla]

Oil prices fall on surprise inventory build. Gasoline inventories rise 2.1 million barrels. Crude oil stocks up 1.7 million barrels.

[dirtboy]

In a couple of weeks, ethanol blends will re-clamp the vice on the supply line.

Except that Bush just suspended the reformulation requirements.

[RSmithOpt]

I predict this to be a manipulative report on the supply of gas s to slightly ease the current price per gal. 10-15 cents/gal. for the next 2-3 weeks. Then on or around May 25, the price per gal with shoot up 20-30 cents per gallon for the holiday weekend and stay up until the first tropical storm forms in the Atlantic, then prices will shoot up another 20-30 cents per gallon and remain at that level unless a major storm smacks the Gulf of Mexico.

[Grampa Dave]

Imagine that... It's almost as if the SUPPLY and DEMAND of a commodity affects prices.

Rush, this week played a tape of an appearance of Dirty Dicker Turbin on Neil Cavuto's show. It was obvious that this worthless and biased $inator either flunked Econ 101 or didn't want to discuss any Supply and Demand laws.

[txoilman]

Remember the $100 rebate that the Republican Party was considering and everyone called it a joke. Well I made some calculations based on how many miles I drive each month and these are the results:

$100/.18 cents per gallon federal tax = 556 gallons to be used with no federal tax.

I drive about 200 miles per month and get about 10 miles per gallon in my van.

200 miles/month divided by 10 miles/gal = 20 gallon per month.

So how many months do I need to drive and burn gas without paying any federal tax:

556 gallon divided by 20/gallon per month = 28 months.

So I can drive for 2 years and 4 months using gas without paying the 18 cents per gallon federal tax.

Not a bad deal after all!

[jec41]

For that to be true, demand would have had to have dropped suddenly, in the course of one week, an average of five percent a day, with no warning from previous weeks that such was going to happen, in order to blindside the analysts.

Well I forgot to warn them that I was going to buy less this week and maybe others did too. If analysts were always correct oil would be at $40 a barrel predicted by Forbes or a $100 a barrel predicted by other investment analysts. Are they both correct or neither correct.

[dirtboy]

I think your perspective on oil inventory is off ... but considering our weekly stock is over 300 million barrels

Once again, I am not talking crude oil inventories. I am talking gasoline inventories. We use about 9 million barrels a day of gasoline. That is 63 million a week. And the forecasters were off 2.8 million barrels - a much more signficant difference.

You have yet to make this an apples-to-apples debate.

[thackney]

Didn't we just stop purchasing oil for the reserve? Um...wasn't that done to decrease demand and increase supply?

The world oil market is ~83 million barrels a day. The reserve was being filled at ~0.067 million barrels a day. Do you really believe that made a difference?

[Always Independent]

I'm starting to think that the reports about demand and inventories are where the numbers are being manipulated. Also read story where exxon chairman said that there was record demand last year for heating oil and natural gas due to extremely cold winter. I thought the weather service said we had an extremely mild winter. So who is feeding us a line here. Big oil? Gov't Energy secretary? OR BOTH?

[trubluolyguy]

So we'll be expecting to see prices drop by next month, right?

[Grampa Dave]

"I got out of my one oil stock because I figure basic economics will finally kick in - higher prices = more production = less usage."

I sold my ETF's based around gasoline a couple of weeks ago for the same reason. Also, whenever NewsWeak and Slime make their cover story on terrible oil, the prices started to drop before they got their old news printed.

[rhombus]

Where are you getting your figures?

[trubluolyguy]

Breaking: Man is putting oil in his boat. Spills a drop. Severe shortage COULD happen. Oil up $2.00.

---

Seems like that is the story every other day or so isn't it?

[dirtboy]

I'm starting to think that the reports about demand and inventories are where the numbers are being manipulated.

I agree. Between all the consolidation that we are seeing, the surplus of scary news in oil producing areas and the tightness of markets, we are in a situation where a few people can control the flow of information to play the futures markets. Sooner or later, the information comes out - and it just so happened the information came out after Bush did something to impact the price of oil and gasoline. A coincidence, I'm sure. Not that Bush is involved in any way, but the opportunity presented itself to sanitize the release of information that sooner or later had to be released.

[mnehring]

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.

Among other things, your math is bad. Analysts originally projected a drop of 700k barrels off the supply of around 300 million barrels, that is a .23% decrease. Instead, the actual inventory was (roughly) 302,100,000 barrels, which is a .9% increase. The difference between the two projections is roughly .98%.

[kellynla]

"I never heard of this agency before"

Just part of the Department of Energy.
There's actually a lot of information that can be found on their site.
http://www.eia.doe.gov/

[Grampa Dave]

"And people like me are driving less. Back and forth to work and that is it.

Isn't amazing how that works. Seems like every April/May and even in March when this shortage hits the wall, people like us drive less.

Instead of driving my OJ Simpson Bronco to do daily errands, I wait until my wife is off work like today. Then, we go in her Lexus with multiple shopping and errands preplanned. Her Lexus gets 22-25 mpg in town and more on the open road, and my Bronco gets about half that mileage. On the way back, we will stop at Costco to fuel up at about 10 to 20 cents less per gallon than local stations.

[silentknight]

Quote "Wow, man.

Like prices rise; and then supply rises and demand drops; and then prices drop; and then . . .

It's like a cycle of business or something. A curve. A wave, even. Blows my mind.

(yes, sarcasm)

We at the crest everyone. Relax."

Oh really? Do you have a crystal ball or something? We are likely not even close to the crest.

[taxcontrol]

Perhaps you missed this section of the article.

"But prices shot up again this week, fueled by big investment fund buying "

That means mom and pop and 401K managers are starting to put their money into oil. That helps drive prices up on speculation.

Further, analysis in just about any industry are often wrong. FOJC (frozen orange juice concentrate) analysts are wrong so frequently, that they are often ignored in the market place. Just like stock analysts. Some get good at guessing the prices for awhile... during the times when their math model works, and then there is some subtle shift in the market that changes what they anticipated.

Like perhaps people DRIVING less? You think they may have missed how many people would simply not be taking trips or curbing their consumption by car pooling or working from home. Maybe even taking fewer trips by some simple consolidation of their activities?

An unanticipated drop in demand would easily drive up inventories.

[dirtboy]

Among other things, your math is bad. Analysts originally projected a drop of 700k barrels off the supply of around 300 million barrels, that is a .23% decrease. Instead, the actual inventory was (roughly) 302,100,000 barrels, which is a .9% increase. The difference between the two projections is roughly .98%.

You keep playing games with the numbers. Once again, we use 9 million barrels of gasoline a day. That is the key figure here. If we use more than is refined or imported, inventories drop. If we use less, inventories rise. So instead of there being a shortage of .7 million barrels, there was a surplus of 2.1 million - of GASOLINE (please try to quit mixing gasoline and crude in your analysis, I am talking solely about gasoline). That means a delta of about five percent a day from daily consumption in what analysts projected. That is a major difference in that short of a time period.

[kellynla]

"So we'll be expecting to see prices drop by next month, right?"

noooooo LOL, actually you can expect gas prices to rise Memorial Day weekend...