The only thing going up faster than the price of crude is the size of the inventories. Crude inventories havn't been this high since May 1998. It would seem that higher inventories do not keep crude from going up. Maybe Crude would be $80 if not for the high inventory? The price of crude seems to move as it wishes with little correlation to anything. Inventories reported by the gvt are definitely near irrelevant it would seem.
You are correct about high inventories. The reason though is that refining utilization is running about 6% less than normal at this time of the year, thus inventory is increasing with less refinery runs. The price is strong due to the products (gasoline, distillate) being in short supply, again due to weak refinery runs. The crack spread will keep a correlation with refined product prices in turn supporting oil price, even in a glut. Everyone wants to bash big oil for monkeying with high gas prices. In reality they are artificially squeezing refining by keeping some capacity offline to control prices through the products rather than the oil itself which is in good supply at the moment. This is very similiar to the California energy crisis in 2000 where Enron and others kept power and gas transmission capacity offline to artificially drive up prices. Unfortunately this is a much harder game to prove wrongdoing in. You can thank your Vice President Dick Cheney and his "secretive" energy policy for this.
7 green days in a row for another 5 bucks (roughly) ... one would think a pullback were in order. (Wow, sorry about the lousy looking chart ... not sure what happened)
Great point of view if you get your news from Keith Olberman. In reality, the refinery squeeze comes not from capacity squeeze, but from a shortage of actual refineries. Our govt is so big and inefficient that we can't get another refinery built b/c of all the unnecessary regulation. Try building one in Tennessee near Al Gore, or in NC near John Edwards- you'll see gas prices back down in no time.
We don't need to build another refinery here, we need to use the capacity we have. They have expanaded capacity at many refineries over the last several years and have halted plans for more expnasions at others.
What about maintenance? I heard somewhere that the oil infrastructure in the US is getting old, and it requires alot of maintenance. Couldn't this down time just be the result of aging equipment?
I read Europe inventory levels are at 2 month lows. Based on Brent, WTI CL is really $77 here if not for the record inventories. That is keeping it $5 depressed. This could be the way to look at it.