White= Total distillate
Red= low sulfur distillate
Distillate Days cover
In a similar way, stocks in cushing admittedly has been declining over the past several weeks. However, the fact that it had reached almost capacity weeks ago means this decline is just mechanical and should not be any bullish to the market. Moreover, as tigeram1 commented on yesterday(cheers for that btw), offshore crude can be called in easily. If we see more voluntary run cuts and higher than normal refinery outages, then crude stocks will swell again. WTI trading below Brent is a sensible market mechanism to reduce crude flow into the US( in theory we should look at LLS but will go into that later). The fact that WTI in the prompt remains well below Brent, cemented by k9m9 in significant contango is a tell tale sign that physical market has nothing bullish for crude, yet.
Cushing stocks WTI
IEA to publish even worse demand numbers were doing the rounds recently and at the moment, there seemed to be no real consensus as to how bad demand might be headed whereas there seemed to be a consensus that crude stocks will at least be balanced in the next few quarters. Perhaps when demand becomes clearer we will get a better picture of the next trend, but at this moment, SFOT has to say, the shorts might not have the power in this game.
Posts
Crude oil.......POS TO 0!!! Tigeram1 is also POS.
ReplyDeleteTigeram1 is no POS, he is the man!
ReplyDeletePerhaps its time to shutoff anonymous comments and start banning trolls.
ReplyDeleteJust to add to SOFT's comment about Distillates, it's tough to get bullish about refined products in general with so much extra capacity coming on line esp. in India and China. So, Over the summer in addition to the extra product coming over from Europe, we can easily have tons more supply coming from the new facilities.
ReplyDeleteSecondly, on the demand front, most of the estimates stand at -1% to -2% range. That puts its roughly in line with the expected drop in world GDP growth (-2.5&, IMF is still a bit above that, but est. should come down in another 2 months). For the past decade, demand growth for crude has been roughly 2X the world gdp, so that with a very rough, and admittedly anectodal calculation, puts potential demand numbers down to -4%?
That;s the sort of number not being actively discussed
tigeram, I think I would need to be a bit more pessimistic than that.
ReplyDeleteTransportation/Industrial consumption account for 94% of crude consumption in the US. There are various ways to look at this, but we have 23% drops averaged among the big three (GM - 18, Toyota - 21, F - 28%) automakers. Then we have trade falling off a cliff and ofcourse ISM manufacturing lingering around all time lows (say 28year lows?).
IMF GDP projections are understated if you assume the asset price driven deflation outweighs other fiscal inflationary policies. We can adjust the official CPI by replacing the homeowner's rental equivalent (which is weighted at ~25%) with say Case-Shiller's and then come up with a inflation-adjusted GDP we will have a much bleaker number. So far the vol tankage has been great for option desks like mine, but i request SFOT to not lose his (her?) bear bone. The turnaround is somewhere around the corner!