Dabum - Food for thought.
Thoughts for the day:
Six of one; half a dozen of another.
A Rose by any other name, would still smell as sweet.
Ok the latest DOE charts are out so now would be a good to look at your question.
Crude and aggregate stocks:
eia.doe.gov
Gasoline stocks:
eia.doe.gov
The scariest chart of all - Distillates:
eia.doe.gov
Salient points:
1. Note the extreme draws that occurred just to bring gasoline stocks into the middle of the range.
2. Said draws were occurring during a period when most of OPEC and NOPEC were pumping at full capacity.
3. Distillate stocks in the NE have a very small build, and compared to last year have only reached TROUGH LEVELS.
Number 3 is an extraordinary fact don't you think?
OK, so it's too late now to get a build sufficient to power the nation's heating needs. It's over, finis, sayonara, arriva derci baby! There are only three things that can bail this situation out.
1. MASSIVE imports.
2. Super human refining rates.
3. Deus ex machina - God comes out of the sky and makes winter summer. Ie, demand plummets.
I simply don't know how to deal with number 3 on any kind of statistical basis. We do know, however, that the conditions that resulted in the warmest winter on record are no longer present. That huge El Nino/La Nina pattern has worked it's way through the system, and is now absent. Also the solar cycle has peaked. We may be witnessing a beginning of a pattern of a return to more normal seasonal temps. Could this years cooler summer be an early indication of same? I don't know for sure, but it is a reasonable assumption.
Number two is probably out of the question. The refinery run rates of the summer have taken their toll on the nation's already barely adequate refining capacity. All indications are that the September maintenance season should be deep and long.
Number one seems to be the only way out of alleviating the situation now. OK, so if dumb ole Bullsky can figure this out sitting at his computer, I would think so could OPEC. ( a dangerous conclusion I know). Therefore, as JQP has suggested, Asia may see the lions share of any new OPEC production, not us, as they seem to have some spare capacity. But this is a logistical nightmare, and will probably result in some very wacky API and DOE numbers, replete with revisions galore.
In conclusion:
Does it really matter if crude builds 20 million barrels if gasoline and heating oil plunge through lower operating levels? The aggregate stocks are topping out now. The previous OPEC production hikes did NOTHING, I repeat, NOTHING to alleviate the depressed levels of of aggregate stocks. The US is still firmly on Matt Simmon's treadmill. I don't expect to see crude prices plunge into the low 20's - UNLESS -
Crude stocks build WITH HO/distillates, and gasoline. IMO the key numbers to watch are the aggregate stock levels. Taking crude levels in isolation is and has been a mistake during the recent "product crises". Having said that, we must remember that everything must work perfectly now down the supply chain. Any, and I mean ANY major disruptions could be catastrophic.
A rose, is a rose, is a rose. |
