I believe Bearcatbob is correct..we must adjust for inventory
I agree that Bearcatbob is right and you must adjust for inventory changes to get the actual usage. If you read my post again you will see that I wrote about this:
(total inventories inc SPR started the year at 1,671,000 and now stand 1,670,000 vs beginning '07 at 1,712,000 and holding 1,709,000 at this time last year so the year over year changes are nominal)
I meant to post a link but I covered a lot of ground and it was late.
tonto.eia.doe.gov
The data from the link above shows we started the year with total inventories at 1,670,962. Last week's total inventory report ended with 1,669,885. The data from '07 started the year at 1,712,490 and ended in the second week of September at 1,707,196. So total crude and petroleum product inventories dropped a little over 1 million barrels this year and about 5 million for this time period last year. We are talking about about 255 days here so it is statistically meaningless. If it were meaningful, I would have included it. I originally used the week ending 9/7 for the 2007 numbers in my post because the 14th hadn't arrived yet. In retrospect I should have used the numbers for the second week in September but as I've stated it is statistically meaningless.
Also I showed a chart of the December 2008 contract which is not an accurate picture of the price of crude during the first nine months of 2007. The strip was in forwardization at the time and the December 2008 contract was about $5 above the spot price. I don't know where to find a chart of the historical spot price.
I was shocked at what my analysis shows. It took a 77% average increase in the price of oil to price 4% of the demand out of the market. If you believe that exports have peaked, as I do, we are going to have to do this again next year. So does that mean we are going to go to $180 a barrel next year? Right now we are in shoulder season and so supply can meet demand as demand dips for a few months. We learned in 1998 that a small surplus can have a dramatic effect on price. In another two months when heating season starts, its off to the races again. Throw in Gustav and Ike and I don't think we will have to wait that long. I believe that the summer spike might have been overdone. China could have been stocking up for the Olympics right when our refiners were stocking up for driving season. I am speculating though because we don’t have accurate numbers from anybody.
If you’ve followed my post you know that I’ve stated many times that Europe is paying the equivalent of $250+ a barrel now. No energy source is displacing oil as the predominate energy source for individual transportation. Europe will lead us to what is next and so far it isn’t hybrids. Oil at $100 is way too cheap.
A real interesting turn of events occurred today when the front month contract October just went into backwardization with a price above the November contract. We have already passed the notice date for delivery. That means whoever is buying the October contract intends on taking delivery. When crude today is worth more than crude a month from now it indicates a tight market because there are carrying costs for storage.
A link to real time quotes for crude:
nymexdatardc.cme.com
Carranza - I never stopped buying TLM. I've been scaling all the way down. Right now TLM is selling for a little over 2 times cash flow. I think that is unheard of for a multi-billion dollar company. |
