If your job is counting the crude stockpile or making media headlines, you can insinuate whatever. Investors however must get to the bottom of the reports, sort through the noise, and figure fundamentally what’s likely ahead.
OPEC is cutting 1.8 million in supply… compliance even among non-opec nations is reported at 90% even in spite of IRAN and IRAQ acting like problem children.
US Rig counts have risen, but domestic production won’t make up the difference or come close to past highs.
- US Peak production occurred on 6/05/15 @ 9610 barrels / day,
- Most recently as of 2/10/17 production surged higher reaching @ 8997/day.
- The nadir occurred on 10/07/16 @ 8450… when crude was pluming $30/barrel.
Today’s $50+ oil is a long way from $100+ when production was peaking. The fundamental incentive is simply not there.
So where is all of the oil coming from? Why is there so much oil in storage? The Strategic Petroleum Reserve, (SPR)… remember the US gov’t has just sold 10 million barrels to upgrade the warehouse. Total crude count rise for the week was 9.5 million barrels. But read a little deeper and the SPR isn’t supposed to sell additional stockpiles until the next 3 years.
Tighter supplies, better balance, and I have wagered higher prices are likely ahead. ETF’s (UNG, USO… ugh!) Chose your equities carefully.