What do we have 8.2 million more this week than last week?

[Bronzeage]

Answer: Barrels of crude oil.

U.S. crude oil inventories grew by 8.2 million barrels this week, according to data compiled by the U.S. Energy Information Administration.

The price is still under $50 a barrel and not expected to rise, as long as inventories remain high. There is one interesting item in the article. While crude oil stocks are taking increasing, gasoline inventories fell by 2 million barrels last week. Refineries usually shut down for maintenance in the early spring in order to prepare for the switch to summer grade fuels, so that may account for the drop. It may also be caused by oil companies trying to get their production in line with actual consumption and push prices back up toward the $3 mark.

In the meantime, I keep getting emails from GOP fund raising committees urging me to demand approval of the Keystone pipeline, in order to assure our energy independence. I guess Canada doesn't count as a foreign country.

 

[dismal]

I guess the greedy speculators are just taking some time off from being greedy.

 

[ksen]

Greedy speculators are able to push prices in either direction and still make money.

 

[dismal]

Greedy speculators are able to push prices in either direction and still make money.

Then why do we only talk about greedy speculators when prices are going up?

Or did I miss some congressional hearings on falling oil prices in the last couple months? Or, ever.

 

[Bronzeage]

I guess the greedy speculators are just taking some time off from being greedy.

Greedy speculators, or "futures traders" as they are sometimes called, allow refineries and chemical plants to guarantee future supply stocks at a fixed price. This protects a business from sudden price spikes in their basic materials. Overall, this keeps prices low by keeping more refiners and manufacturers in business.

 

[dismal]

I guess the greedy speculators are just taking some time off from being greedy.

Greedy speculators, or "futures traders" as they are sometimes called, allow refineries and chemical plants to guarantee future supply stocks at a fixed price. This protects a business from sudden price spikes in their basic materials. Overall, this keeps prices low by keeping more refiners and manufacturers in business.

Yeah, having worked in financial planning for a company that owned refineries that's not what happens. Refineries don't want fixed price crude because their product sells at a margin above crude. They might want to hedge the "crack spread" (don't look that up if you're at work), but not the crude price.

Anyway, here's another imponderable thought.

Why is storage filling up now when prices are lower instead of when greedy speculators were keeping it artificially high?

Shouldn't storage pile up when prices are artificially high?

 

[Jimmy Higgins]

Man, that is a lot of barrels. Wonder where they are piling them all. I remember back in 1963 when they ran out of steel barrels and had to use wooden ones for a while.

 

[dismal]

Man, that is a lot of barrels. Wonder where they are piling them all. I remember back in 1963 when they ran out of steel barrels and had to use wooden ones for a while.

 

[Bronzeage]

Greedy speculators, or "futures traders" as they are sometimes called, allow refineries and chemical plants to guarantee future supply stocks at a fixed price. This protects a business from sudden price spikes in their basic materials. Overall, this keeps prices low by keeping more refiners and manufacturers in business.

Yeah, having worked in financial planning for a company that owned refineries that's not what happens. Refineries don't want fixed price crude because their product sells at a margin above crude. They might want to hedge the "crack spread" (don't look that up if you're at work), but not the crude price.

Anyway, here's another imponderable thought.

Why is storage filling up now when prices are lower instead of when greedy speculators were keeping it artificially high?

Shouldn't storage pile up when prices are artificially high?

Storage of which, crude or gasoline? Crude stocks are building up because production is high and everyone wants to pay for all that expensive oil exploration technology. It's difficult to keep prices artificially high when production exceeds demand. The only way to do that is cut back oil field production, which means you can't pay the note on all that pipe and other paraphernalia. Speculation makes money off the margins and when you have an over supply of feed stocks, there is no margin.

 

[ksen]

Greedy speculators, or "futures traders" as they are sometimes called, allow refineries and chemical plants to guarantee future supply stocks at a fixed price. This protects a business from sudden price spikes in their basic materials. Overall, this keeps prices low by keeping more refiners and manufacturers in business.

Yeah, having worked in financial planning for a company that owned refineries that's not what happens. Refineries don't want fixed price crude because their product sells at a margin above crude. They might want to hedge the "crack spread" (don't look that up if you're at work), but not the crude price.

Anyway, here's another imponderable thought.

Why is storage filling up now when prices are lower instead of when greedy speculators were keeping it artificially high?

Shouldn't storage pile up when prices are artificially high?

Wouldn't this be an indication of prices being artificially high right now then?

- - - Updated - - -

Man, that is a lot of barrels. Wonder where they are piling them all. I remember back in 1963 when they ran out of steel barrels and had to use wooden ones for a while.

View attachment 2605

Is that seriously how big a barrel of oil is? I thought they were much bigger and more like 55 gallon drums.

 

[Underseer]

I guess the greedy speculators are just taking some time off from being greedy.

As much as 60 cents on every dollar you spend on gas goes straight to speculators who would not otherwise be able to manipulate prices if not for Republican deregulation.

You're OK with that? Really?

 

[dismal]

Is that seriously how big a barrel of oil is? I thought they were much bigger and more like 55 gallon drums.

42 gallons is a barrel of oil. But seriously they don't actually put in in barrels anymore. That's probably packaged lubes or some other product.

- - - Updated - - -

I guess the greedy speculators are just taking some time off from being greedy.

As much as 60 cents on every dollar you spend on gas goes straight to speculators who would not otherwise be able to manipulate prices if not for Republican deregulation.

You're OK with that? Really?

ksen said speculators can make the prices lower too. Not sure where you got your math.

 

[ksen]

42 gallons is a barrel of oil. But seriously they don't actually put in in barrels anymore. That's probably packaged lubes or some other product.

Oh . . . you dirty dawg!

 

[Axulus]

Yeah, having worked in financial planning for a company that owned refineries that's not what happens. Refineries don't want fixed price crude because their product sells at a margin above crude. They might want to hedge the "crack spread" (don't look that up if you're at work), but not the crude price.

Anyway, here's another imponderable thought.

Why is storage filling up now when prices are lower instead of when greedy speculators were keeping it artificially high?

Shouldn't storage pile up when prices are artificially high?

Wouldn't this be an indication of prices being artificially high right now then?

- - - Updated - - -

Man, that is a lot of barrels. Wonder where they are piling them all. I remember back in 1963 when they ran out of steel barrels and had to use wooden ones for a while.

View attachment 2605

Is that seriously how big a barrel of oil is? I thought they were much bigger and more like 55 gallon drums.

Looks about right - here's a 55 gallon drum size:

Edit: well, as dismal pointed out, I guess they are actually 42 gal

 

[dismal]

Wouldn't this be an indication of prices being artificially high right now then?

It could be an indication that prices are too high to balance the market currently, I'm not sure we have evidence to tack on the word "artificially".

First, you'd have to look at the world not just the US. We here in the US are importing oil and sticking it in storage. (Due to market contango, this is being done by Greedy Arbitrageur Non-speculators...)

Second, there is a lot of inertia in oil markets. They tend to track toward balance rack balance through slow acceptance of reality followed by wild over-correction.

 

[dismal]

Edit: well, as dismal pointed out, I guess they are actually 42 gal

That's the official volume of a bbl of oil. Those may indeed be 55 gallon drums of something.

Oil these days is going to go into a pipe, or a truck, or a tank car and if stored get stored in a big tank (like the ones in the background of the first picture) or a super big salt cavern.

I can't even imagine a reason to put crude oil in a barrel.

eta: except a mega contango!

 

[Axulus]

Storage is at an 80 year high:

 

[Jimmy Higgins]

Storage is at an 80 year high:

OBAMA!!!!!

 

[dismal]

OBAMA!!!!!

CONTANGO!!!!

 

[Derec]

Is that seriously how big a barrel of oil is? I thought they were much bigger and more like 55 gallon drums.

55 US gal is .2 m². Looks about right to me. Serious storage is done in these however.