Yep I guess to both questions. The increase in production will not hit the market for some time, HOWEVER, the inventories continue to increase and weather is not a major factor just yet. With each build like the one of this week, storage at 3.1 tcf is less of a factor. Moreover, when prices rise and the stocks don't anymore, then they look stretched, IMO. Iraq flowing at capacity again after a 4 day interruption of 50%, Nigeria not halted any longer, and neither is Norway. Tomorrow is another day, but as time goes by and the weather does not heat up (I hear it is between 60 and 74 degrees in Detroit these days), that helps to allay inventory concerns.
I do not understand your comment of "... imports are expected to be low for several more weeks?" Imports at current levels appear adequate since inventories are rising at a very healthy clip, thanks to the high price of gasoline and the weather which has moderated consumption to nearly 2% below the increase in inventories. Once the increased production of OPEC hits the shores, the correction will have occurred already as the market will have anticipated this event long beforehand. We are in a game of chicken with oil in transit and earnings 3 weeks away from what I can see. My bet is that we correct beforehand, and in any event, by the 3rd Friday of August we should be lower than where we are today.
Inventories are much higher than they were last year and just about near the 5-year average, but rising fast. I think this premium is going to be reduced before it begins to increase prior to the elections, IMO.
As to inventory levels being low, once a ship is inbound, they know what to expect into inventory pretty well. If one knows that inventories are going to increase at an increased rate in a few weeks, then you can play that game when the markets spike and bet on a near-term correction. But then again, you can hang on and think that there is no where to go but up without a single interruption. Either way, I am just sharing information. Best regards, |
