“Urgent.” The word when read or said elicits a feeling, a visceral sensibility. Funny thing, though, when I read or lead with it relative to the market, it lacks meaning. The market is anything but urgent.
The Dow and the S&P 500 are not moving, the VIX is hanging around 13.5, gold is flat (and has been for some time), and the US dollar is moving a little here and there, but fairly resident in the low-to-mid 90 zone. The only thing around the market that is even trying to show urgency is Brent crude.
- Crude oil futures rebounded on Friday and Brent headed for its first monthly gain since June, helped by strong investor inflows, an improving demand outlook and supply outages.
Brent is above $60, but WTI crude I still around $49. Oil has tried recently to break out, but it is having trouble, for sure. Yes, there are still bulls and bears arguing about US rig counts, supply and demand, global politics, and global economies relative to oil, but the one unmentioned argument that is resonating with speculators is about oil-storage capacity.
As I wrote a month ago, there is demand for more oil-storage capacity, as oil companies try to weather the low-price storm. Pump it, store it, and sell it later when the price goes up is the thinking. On top of that, there is the issue of supply outstripping demand, which means the excess oil needs a home.
- If you look at just the hard data from the EIA you would think that we were close to the tipping point. The EIA reported that crude storage capacity at refineries and tank farms in the U.S. at 521 million barrels at the end of September.
Well, this might be the case, and it might not. The data, as always, is subject to refinement and interpretation – who counts what and why.
- As reported yesterday by Bloomberg news, it seems there is more oil storage than previously thought. Bloomberg points that with inventories rising 8.4 million barrels last week to a record 434 million, it may appear at first glance like supplies from the shale boom are on a collision course with tank tops
And so it goes. When the Bloomberg “news” came out, the EIA came back with a refinement of its numbers.
- The EIA told Bloomberg that “We still have a way to go before we can consider ourselves to be full,” Rob Merriam, the EIA’s manager of petroleum supply statistics in Washington, said by phone. “Once you correct for line-fill and lease tanks, we’re pushing about 60 percent capacity utilization.”
And so it goes … Whatever the case, oil is the only market in town that has a sense of “urgent” about it.
Maybe it is real that oil cannot go lower, that it can only go higher, so buy now while it is at the bottom. Then again, maybe it is just the ambiguity of the data, the push of the news for the story, or, big money driving the mindset that oil cannot go lower, that it can only go higher, so buy now while it is at the bottom.
One thing is true and factual, though. RBOB is now at $1.96, up from its recent low $1.23. Someone is urgently betting on oil going back up.
Trade in the day; invest in your life …
