A cataclysm to both production and refining was priced in. The assets are standing and repairs can continue. |
A large consuming area in the Midwest is going to experience a relatively significant degree of cold weather, and that is going to help support these prices. |
A large swath of U.S. demand was taken out of the market as a result of Katrina. The EIA report shows that U.S. demand growth will decline by 40 percent. Overall inventories are still healthy. |
A significant amount of refined products will remain off the market for some time to come, and will prevent heating oil and gasoline stockpiles from being replenished, at least for the next few weeks, |
And the refinery utilization rate is also a disappointment. It came in only at 84%, and right before the hurricanes, we were upwards of 95%. |
Apparently, the immediacy of a surplus trumps geopolitics, for a day or two anyway. The next two days will focus on stockpiles and moderating weather, then, as the weekend approaches, the focus will widen again to the world. |
Apparently, the market does not believe a turn to colder temperatures will boost heating demand enough to make a significant dent in supplies. Obviously some other supply disruption may have to occur to take the pressure off prices. |
As an oil market participant, it's hard to know. Given all the rhetoric ... everyone's positioning themselves accordingly. |
As much as Katrina has taken (the oil) supply off the table, there's also demand it has taken off the table. |
Basically, some easing of the tension vis a vis the Iran situation helped to take some of the worries out of the market in term of potential supply disruption from that country. |
Consumers are unrelenting in their demand for oil in the United States. |
Crude oil supplies are at an almost eight-year high. The price is obviously not reflecting that. It's reflecting the worries about the future. |
Currently, there is adequate supply to contend with what remains of winter, particularly if mild weather persists. |
Davis is definitely the gold standard, |
Demand destruction fears are trumping fears about damage to oil facilities. It's not just Katrina that is hurting demand. High prices have strained economies, especially in Asia, and demand is being curtailed as a result. |