Another 8 Million Barrels Added To Oil Storage

EIA Inventory Report

The EIA Petroleum Report came out today and the report was pretty bearish. Much worse than the API Report released the night before. Of course, Oil was up on the report, in fact had a robust day at the close as the shorts got squeezed. This is nothing new for the market, almost every Wednesday or EIA Report day ends in the green, especially the Bearish ones, this goes back a long way in oil trading folklore. So much so that a funny joke amongst oil traders is “Crude Oil finished up $2 on the day, must have been a bearish inventory report!”

Almost all the 8 million build is centered on the Midwest to Cushing to the Gulf Coast refinery corridor route which is even more bearish as all 3 storage outlets are building together. There is so much oversupply in the market that they cannot even make one energy hub appear better by moving the oil from one storage hub to the next a la the massive pipeline initiatives from Cushing to the Gulf Coast Region. Just look at the year ago numbers, the already bloated Gulf Coast Region added another 27 million barrels to storage from this time last year. Cushing has added almost 28 million barrels to storage in a year, and the Midwest has added an astounding 44 million barrels to storage in a year. Moreover, we are still in the middle of the building season, as I have seen years where we build right through May and a couple weeks in June putting in higher and higher overall oil inventories. This year better be a short building season, or the rails are going to come off the oil market rather quickly over the next couple of months.

US Oil Production

In regards to the production side of the equation we had another higher high in the Production Trend:

We produced 9.42 million barrels per day versus 9.41 the prior week and up 1.23 million barrels per day versus this time last year. No wonder we keep having these large upside inventory builds each week. This illustrates that the Rig Count Number is highly misleading, what matters is the Overall Well Count Number. Producers can bring additional wells online to the existing Rigs in operation while cutting less efficient Rigs from the equation, and the total wells producing oil can actually go up while the overall rig count numbers are coming down. The result lends itself to higher production output numbers each week.

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Ferdinand E. Banks 6 years ago Contributor's comment

The summer of 2008 was Lovely for me, because I was in Paris and in love...with drinking wine outdoors. The price of oil was going into orbit, and predictions were that it would go over 200 dollars. Then of course it started down, and it kept going down until it reached 32 dollars. That was when OPEC gave a demonstration of just what they could do. They had a couple of meetings and the oil price started up again, and did not stop until the price was over 100. We dont hear much about OPEC these Days, but I suspect that they can live with what is taking Place a while longer. At least the countries in the Middle East can.

Ferdinand E. Banks 6 years ago Contributor's comment

An absolutely important article where I and my work is concerned, however remembering what happened in 2008-09, I wonder how OPEC is going to fit into the present Picture. Maybe I'll try to figure it out if the weather here doesn't get better.

Dan Jackson 6 years ago Member's comment

What specific aspect of 2008-09 are you referring to?

Bond Troubled Trader 6 years ago Member's comment

Well, considering the US uses 18.5 million barrels per day, this tells me we don't have enough.