Fastest increase in U.S. oil inventories on record


#1

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#2

… yet at the same time, the number of oil and gas rigs in the US is down ~40% since early December, to its lowest level since late 2009 and not too far from where the rig count stood before the shale gas “revolution.” Virtually all energy companies have announced massive cutbacks to their capital spending plans. Inventory builds in the U.S. should begin dropping off before too long.


#3

I think a lot of the business practices of frackers are abhorrent as hell, but I gotta admit, I do see cause for hope in less dependence on oil.

Would that I did not have to choose between two awful things to run my laptop…


#4

What we are seeing right now is the classic ‘boom/bust’ cycle of oil producers that has been going on for over 4 decades now. We are witnessing the beginning of probably one of the greatest bust cycles ever. Commodities do not follow the usual laws of supply and demand like other consumer goods so any comparison to cars, computers, washing machines, [insert whatever product here], does not hold up.

The real issue that is never acknowledged in these discussions is the refining capacity that impacts fuel prices more than anything else. Artificial restrictions (summer switchover, going offline for maintenance) is a game that refiners play in order to manipulate prices at the pump. The US is now a net exporter of refined fuel so bringing oil over from Saudi just to ship it back out again is silly.

The U.S. has hundreds of millions of barrels of oil stored up in the SPR and a few million barrels in Cushing does not really impact the global market all that much. However, the ground has shifted under the energy companies and we will soon see producers shutting down and going out of business as the price per barrel continues to drop to ranges not seen since the late 90’s Clinton years.

Of course this means that any further discussion about Keystone XL is silly and pointless and the unfortunate by-product of cheap gas is the return of gas guzzler trucks and SUVs.


#5

I don’t see any indication in the article that this is due solely to US production. Much of the inventory could have been imported.

Oil is a traded commodity. Trading companies and investors will attempt the same “Buy Low, Sell High” strategy that any other stock or commodity trader strives for. In this case, they’re buying actual oil, not an invisible stock share. The oil has to be somewhere in the physical world. And if they’re waiting for prices to increase before selling, then the oil has to sit in storage until the price rises or the trader changes their mind and sells. High inventories could simply indicate that a lot of investors are holding their oil and waiting to sell. It’s not a simple supply (from the ground) and demand (to burn) situation.


#6

Cheap? Bust?
Here in Oregon, I saw gas as low as $1.87 within the last 6-8 weeks. It is now around $3.00 again. I would love an explaination for that… :::collusion:::


#7

Yeah, here in SoCal it’s pretty much back to where it was before the dip. I think a possible factor keeping prices from staying low too long is that suppliers have figured out how much the public is generally willing to pay, and I think that acts as a counter balance to competition driving down prices. With all the price swings in gas of the last 15 years or so, it always seems to gravitate back around the same level.


#8

Got to remember that lower oil prices does not necessarily translate into lower gas prices immediately - although there is correlation the biggest factors are refining capacity and transportation costs.

A lot of major cities are limited in their ability to bring in refined gas cost effectively. The cheaper gas markets usually have pipelines in addition to highway infrastructure so the inbound supply of gas meets the demand for the local market. In some areas, the only way to transport fuel is by truck so demand can often outstrip supply leading to higher pump prices.

Some markets, like Honolulu for example, will always have much higher prices than say Tulsa.

With that said, we will all start to see prices falling further across the board as the lower intermediary price of oil is absorbed into the supply chain. This will go on for a while until the supply glut is eventually evened out due to producers stop drilling and the whole process repeats itself.


#9

I get that. What I don’t get is the massive fluctuation of 50% in very little time. Funnily, I wouldn’t be complaining had prices not gotten so low.


#10

There is a strike and the cold weather (if your cooling supply freezes before it can flow in, you are screwed) have really limited refinery capacity. So, gas is expensive, because there isn’t enough of it, but oil is cheap, because they are still pumping it out of the ground, but they are going to have to slow down soon, as there is no place to put it.


#11

Depends on where you sit. If you’re the buyer and shipped Saudi oil is cheaper than US oil because you made the contract in advance at less than the current spot price, well…

What state do you live in? At this point many have electric choice programs, where you can find a supplier that guarantees your electricity “comes from” some stated mix of renewables (the good ones will explain that these renewables are additional, and not counted towards any normal renewable portfolio standards that may exist in your region). And it is usually only 1-2 cents more per kWh. Actually in MA I buy 100% wind power, and it is actually cheaper than what national grid raised prices to, because I locked in my rate for 3 years.


#12

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