Where is all of the demand going to come from? That was the question that seemed to control the market's mood yesterday. Oh yes, the consumers are confident and it looks like housing has hit the bottom but as for oil prices, exactly what does that mean.
BP, Europe's biggest oil company, after a 53% drop in year over year profits said that there is "little evidence" of a recovery in demand. That set a bearish mood that only seems to be exemplified by the release of the last nights American Petroleum Institute Report and a plunging stock market in China. The API reported a huge increase in crude stocks to the tune of 4.1 million barrels that seemed to grab the market's attention. The products were benign with the API reporting gasoline supply off by 47,000 barrels and distillates up by 116,000 barrels. In Cushing, Oklahoma the API reported that crude supplies increased by a healthy 1.2 million barrels.
These are the numbers that the Department of Energy report will be compared with. The Bloomberg pre-report outlook showed that based on their survey the street was looking for a 1.5 million barrel draw. Bloomberg says that stockpiles have dropped in 10 of the past 11 weeks, slipping to 342.7 leaving supply 7.3% higher than the five-year average. The survey also showed that gas supply should be unchanged and diesel supply should be up by 1 million barrels. Refinery runs are expected to run at 85.8% of capacity last week, unchanged from the previous week.
Is a spec wreck causing a rift at the CFTC? The Wall Street Journal seems to be suggesting that perhaps CFTC commissioner Bart Chilton may have spoken out of turn when he said that a report exonerating speculators from manipulating oil prices was based on "deeply flawed data" quoting Bart Chilton, one of four CFTC commissioners. In remarks yesterday Chilton's boss and Chairman of the CFTC Gary Gensler said that the CFTC is updating but not necessarily revising the report. In other words the CFTC is not throwing out the report or the findings that the moves in oil were based on supply and demand. This is a good thing.
Of course no matter what the facts are there will be some people that will never be convinced. Yesterday Senator Bernie Sanders was blaming speculators for driving prices higher this year as demand went down. Yet according to Bloomberg news the evidence shows just the opposite. In Bloomberg "Chart Of The Day" story they show that hedge funds and the world's largest speculators cut bets on higher oil by 97% during this year's rally. That is right by 97%!!! Bloomberg says that, "crude's 53% recovery coincided with a collapse in the net number of bets on rising prices held by "non-commercial" traders.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or pflynn@alaron.com .
