I think the world economy is cooling some, but oil usage is still on a powerful growth trajectory. When you step back and analyze what happened this week, you can see that:
1. Distillates were finally built, as an extraordinary refining effort (the issue isn't especially US CL inventory, it's byproduct) was made, with utilization above historic high levels (see page 5 RJ: beacon1.rjf.com, that's unsustainable. Even so distillate inventories are at historic lows (see page 3 RJ report). Additionally, the weather Russian Roulette bullet was totally avoided in Nov, they are just damn lucky is all, with an incredible 55% less HDD than norm.
cpc.ncep.noaa.gov
But now real winter starts.
2. Traders and funds are reactive, and just operate on rote, selling "because they're suppose to". I would bet that they are now shorting the energies complex, and that's nuts, because nothing has really changed. There was a decent swoon in Cu too last week, more "bogus synthetic economics" IMO. Because of a slowdown? Perhaps, but the bottom line is that someone quickly showed up yesterday to clean 3,696 MT out of Comex and LME, bringing it down to 92,602 MT. A full fledged Depression is going to be required to keep copper and energy prices capped now. |
