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It has been a crazy day for oil traders. Immediately following today's inventory report from the Energy Information Agency, oil took a major turn lower, but in late day trading has turned around and is once again pushing towards the psychological $50 mark.Looking at the report, oil inventories did exactly what they were expected to do: rise 1.94 million barrels for the week ended March 13. What initially sent oil prices lower was news that gasoline inventories rose by 3.2 million barrels. Analysts had been looking to see gasoline inventories actually shrink for the week by 2.1 million barrels.
With the weekly gains in oil inventories, America now has a total of 353.3 million barrels of oil. This is the highest amount of inventory that the country has had on hand since back in June, 2007.
Despite the bearish gasoline figures, it appears that traders have once again decided to use the stock market as its indicator on oil prices. With the DOW up 1.8% and NASDAQ trading 2.5% higher, oil traders have followed suit and pushed the precious crude up to $49.87, up $0.71 on the day.
While gasoline stockpiles definitely shocked the market, traders could be overlooking the increase and instead focusing on the news that demand is slightly higher than during the same time last year. For the week, gasoline demand was 9 million barrels a day, which was 1.1% higher on a year over year basis.
All in all, a pretty wild ride for oil traders today, which at one point were looking at oil prices dropping as low as $46.92.
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Reader Comments (Page 1 of 1)
3-18-2009 @ 11:02PM
ravishenoy said...
This could be a case of the market belief in the wealth-effect. As equities rise, the wealth of individuals rises although it is not equal to cash. The higher wealth gives confidence to an investor that he can spend more today and bank on the rising portfolio to support spend tomorrow. This could result in more spend on travel - this would have been curbed if the investor felt that current income+portfolio would not be able to meet future needs. Markets usually smell this in advance and reflect the future - oil market seems to be smelling higher demand in the future.
Also, lower spend by OPEC and other producers means that oil production will decline in the future and a slight jump in demand could overwhelm the reduced supply - causing a price spike.
3-19-2009 @ 9:25AM
dang1067 said...
Yeah, while you were all being distracted by the AIG BONUS, Wall Street did a fast one by jacking oil-price to $51 bbl... It was only a day ago when the Energy Department announced they're flooded with supply due to the sinking demand caused by dying and fading industrialization... Today is Thursday and as you know next day will be Friday, that's the SCAMMING ROUTINE days that causing all these oil trading frenzy. And they will continue to do this every Thursdays and Fridays there after... So if you want to keep oil price sinking, conserve, be very FRUGAL and avoid buying fuel whenever you can... Oil price must remain under $10 bbl!!!
3-19-2009 @ 1:03PM
Iridium said...
Remember oil traders operate outside of demand models and real statistics.
They use oil as a hedge and drive the price up and down depending on the day.
We also allowed billions of barrels to be bought by people who can't and will never be able to actually use oil.
Millions of barrels are sitting in storage, sitting there like gold bars. It will never be turned into gas or other products. It is sitting there bought at $35 waiting for the price to go back up to $100.
There is plenty of oil but it isn't being sold and that is the problem.
The only solution is to find oil traders that are not connected to the actual oil market and kill them. They are terrorosts and need to be killed.
These trading terrorists have caused far more damage that Al Qaeda ever could. They are a target of far greater importance. If we do not kill them we will be driven into the greatest downturn of all time.
In the face of radidly declining demand and incredible inventory levels they still find th eammunition they need to drive the price of oil higher.
When trading goes in the opposite direction of all signals they foul play must be involved. Where the hell is our worthless government. The day we take a single oil trader and execute him on the street is the day oil falls to $20 a barrel. It needs to happen and it is right to do it. There is no mercy for terrorists because they show us no mercy.