The Case of the Missing Oil
I wrote yesterday about disappearing iPhones, so continuing on the Encyclopedia Brown approach to investing, let's talk about the case of the missing oil. With most major economies weakening, oil prices through the roof, U.S. refinery utilization at near-term lows, and with the summer driving season still a ways away, the general consensus was that this week's oil inventory figures in the U.S. should have shown a material increase.
They didn't. Matter of fact, they showed the biggest inventory decrease since last August, which was a baffler to many of us who at least try to follow oil markets. Instead of inventories being up this past week, they were down -- and down markedly, with there being a 4.53 million barrel decline to 224.7 million barrels last week. As one trader put it to Bloomberg, "The robust supply cushion for gasoline appears to be vanishing before our eyes".
So, where the hell has all the oil gone? Well, the problem seems to be at the refined end. Crude oil supplies have been up for 11 of the last 12 weeks, so the issue isn't there. Instead,despite higher prices and a weakening economy, people are driving more than most models would predict. Granted higher refinery utilization levels would also help, but that's a two-pronged sword as higher utilization rates make the market much more prone to mad swings, with even a single refinery going offline causing oil prices to go bounding higher.
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