US Crude Inventories Are on the Rise

DOE data released yesterday show much larger than expected build in inventories of 4.175m barrels versus a market consensus of 2.6m barrel build. This may just be some regular miss of forecasts which happens a lot in the DOE weekly crude inventory data release. Even on the chart below you see a large draw down of 10.57m barrels on 21 December 2011 market was looking for 2.12m barrel draw that day. The December drawdown can be explained by end of the year attempts by refineries to minimize inventories for tax purposes.

Total US Crude Inventories are on the build!

 

More recently there has been a build in total US crude inventories see above chart. The question asked is this the build, in the build up to any possible military action against Iran? Maybe a strike on Iran is not soon as the US is still trying to rebuild inventories in the face of a rising oil price.

US are likely to keep delaying a strike on Iran as war in the Middle East would derail any global recovery as the price of oil in this situation is “your guess is as good as mine scenario”. Having an oil price above USD120 slows world growth and also leads to demand destruction for energy products. The theory is this as total inventories builds price of energy typically falls that’s good for the US economy but under geopolitical scenarios a question mark begs!

If there was a strike on Iran – Saudi saying they can fill the Iran shortfall of 2.5m barrels per day may not be enough as closure of the Strait of Hormuz would mean all bets are off for price forecasting.

Whilst energy prices are resting at these levels you can expect to see a build in US inventories as they try to rebuild stocks.

Good Trading. CF

 

 

 

 

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