[GoghGoner]

It doesn't help that the press makes up stories every day to pretend they know why the market moved. Folks like to have their reasons for things. Haha.

WTI peaked just over 65.74 before retracing backwards today. My guess it that will be close to the highest price that we will see until some data or psychology changes.

[GoghGoner]

Brent rises above $70. It was joined to the stock market and now it is moving the opposite direction. Gold has moved along with oil. Whoever is buying up the oil is also buying up the gold -- the movements in prices are too closely matched for it not to be true. Now, why would big money be buying both and not worrying about the stock market? Oil does some really messed up things in the short term.

[vtsnowedin]

Brent rises above $70. It was joined to the stock market and now it is moving the opposite direction. Gold has moved along with oil. Whoever is buying up the oil is also buying up the gold -- the movements in prices are too closely matched for it not to be true. Now, why would big money be buying both and not worrying about the stock market? Oil does some really messed up things in the short term.

A lot of money fled the stock market over the last couple of days. most of it got parked in ten year T bills, enough to drop the yield on those bills. Another fraction of that money went into gold bumping up that price a few bucks. The stock market has dropped 1100 points in two days making a lot of investors very nervous.
That oil stayed up shows that it is not hitched to the stock market and is a separate creature. For one thing it is a world market and events in the US while having a significant effect are not the whole story.

[Outcast_Searcher]

Brent rises above $70. It was joined to the stock market and now it is moving the opposite direction. Gold has moved along with oil. Whoever is buying up the oil is also buying up the gold -- the movements in prices are too closely matched for it not to be true. Now, why would big money be buying both and not worrying about the stock market? Oil does some really messed up things in the short term.

A lot of money fled the stock market over the last couple of days. most of it got parked in ten year T bills, enough to drop the yield on those bills. Another fraction of that money went into gold bumping up that price a few bucks. The stock market has dropped 1100 points in two days making a lot of investors very nervous.
That oil stayed up shows that it is not hitched to the stock market and is a separate creature. For one thing it is a world market and events in the US while having a significant effect are not the whole story.

All true.

If this carnage continues another few days (at a rapid pace) and gets traders more nervous, then I might expect the oil market to react as "risk off" becomes a major priority again. Otherwise, no reason that oil fundamentals and stock market fundamentals can't sharply diverge.

In the short term, especially if things are dropping fast, the world stock markets tend to be highly correlated (a "follow the sun" mentality where large market drops tend to cascade around the world). But in the longer run, the regional stock markets will strongly tend to be influenced by regional economic strength.

....

Looks like my prediction of higher volatility being "a thing" now is coming to pass, even as I never venture to try to hazard a guess as to short term market direction (because I'm clueless about that).

Given that Trump signed the bill to keep the US from defaulting today, and postponed that issue for 6 months, it can't be a good sign re confidence that yesterday's US market slide continued into today.

[vtsnowedin]

NYMEX WTI close Friday $65.88

[GoghGoner]

Brent just broke $70 for the 3rd time this year. WTI is lagging back over $5. Is this little bull run going to stick? I doubt it, I just don't feel like global demand is too strong right now. On the positive side for prices, looks Permian oil is having trouble making it out from the basin due to limited pipeline capacity and US can export oil at an unprecedented pace with some recent port modifications. The US crude inventories could keep decreasing. On the other hand, Cushing has been filling back up the last couple of weeks, if that continues that would be bearish.

[ROCKMAN]

Goner - "On the other hand, Cushing has been filling back up the last couple of weeks, if that continues that would be bearish." Perhaps. But remember besides being the largest individual oil storage facility on the planet Cushing is also the largest oil BLENDING facility on the planet. In order to meet much of any increase demand by Gulf coast refineries more oil has to be shipped into, blended and stored at Cushing. Of course, some of the increase could be speculators but given current pricing trends that seems unlikely.

[Outcast_Searcher]

Brent just broke $70 for the 3rd time this year. WTI is lagging back over $5. Is this little bull run going to stick? I doubt it, I just don't feel like global demand is too strong right now. On the positive side for prices, looks Permian oil is having trouble making it out from the basin due to limited pipeline capacity and US can export oil at an unprecedented pace with some recent port modifications. The US crude inventories could keep decreasing. On the other hand, Cushing has been filling back up the last couple of weeks, if that continues that would be bearish.

The past week or so, crude has gone back to strongly correlating with the stock markets. With the US market moving strongly many days based on the latest China trade war outlook, it looks like the risk-on vs. risk-off mode has priority.

I'm not convinced one can read too much into such price action in the short run.

...

The outlook for global growth has far more to do with how oil prices will behave over time than how you "feel" about global demand. The overall rate forecast looks pretty steady to me -- at the kind of rate that has been consistent with global demand growth for crude.

https://tradingeconomics.com/forecast/g ... rowth-rate

[GoghGoner]

I have four primary REAL-TIME metrics that I use to create feelings about . Forecasts are meaningless.

[GoghGoner]

Goner - "On the other hand, Cushing has been filling back up the last couple of weeks, if that continues that would be bearish." Perhaps. But remember besides being the largest individual oil storage facility on the planet Cushing is also the largest oil BLENDING facility on the planet. In order to meet much of any increase demand by Gulf coast refineries more oil has to be shipped into, blended and stored at Cushing. Of course, some of the increase could be speculators but given current pricing trends that seems unlikely.

Didn't consider the blending aspect. Inventories were so low that they had to refill some for the driving season.

[Outcast_Searcher]

I have four primary REAL-TIME metrics that I use to create feelings about . Forecasts are meaningless.

If forecasts are meaningless, then we should all just abandon this site, given the proportion of posts making or discussing various forecasts.

Given the track records, I'll take the mainstream economic forecasts, including those of the EIA and/or IEA over the forecasts of the blogosphere (doomer or corny), every time.

[GoghGoner]

This is one of those graphs that makes me scratch my head and wonder what the heck were they thinking extracting so much oil from one region with limited takeaway.

[GoghGoner]

Pop goes the weasel.

Brent crude oil logs highest settlement since late 2014

[ROCKMAN]

Goner – “Didn't consider the blending aspect. Inventories were so low that they had to refill some for the driving season.” The problem is finding out how much oil is stored in Cushing long term by speculators playing the contango angle and how much is working capacity. Working capacity: oil delivered to Cushing, blended and shipped off to refineries. Thus when you see a change in Cushing “storage volume” how much is that number speculators buy and storing at Cushing and how much are they selling and shipping out from Cushing? Same question for blending companies? And oil marketing companies selling/buying from blenders? Or buying/selling with the speculators?

Also a lot of emphasis placed on the Cushing storage numbers. Why? Last Sept there were 78 million bbls stored at Cushing. But Cushing is just one location in PAD District 2 where oil is stored: PAD 2 was holding a total of 154 million bbls that month. IOW the other facilities were holding as much as Cushing. And the total oil being held in all the storage facilities in the 5 PAD’s in the US that month: 479 million bbls. IOW only 16% of all the oil held in storage in the country that month was at Cushing.

So why so much speculation about changes in storage volumes at Cushing? Wouldn’t changes in the total amount of oil stored in the country be more meaningful?

[vtsnowedin]

So why so much speculation about changes in storage volumes at Cushing? Wouldn’t changes in the total amount of oil stored in the country be more meaningful?

Could it be that Cushing being the largest hub is a leading indicator and draw downs or builds there are usually followed by the rest or the facilities. The speculators are of course looking for the first clue about which way to place their bets while the serious traders are certainly aware of all of the available numbers and would only place Cushing data at the level it deserves.

[ROCKMAN]

vt - "Could it be that Cushing being the largest hub is a leading indicator and draw downs or builds there are usually followed by the rest or the facilities." My instinct is no. Each of the 5 PADDs (which cover the entire country) have not only unique regions shipping oil to its storage facilities but also different groups of refineries that are supplied by those PADDs.

Look at the distribution of the different PADDs. How would activity of PADD 1 be affected by activity in PADD 5? Even the impact of Cushing on PADD 2 is questionable. Much of Cushing PADD 2 storage ends up at Gulf Coast refineries while there are a concentration of refineries in northern PADD 2 around Illinois.

https://www.eia.gov/todayinenergy/detail.php?id=4890

[vtsnowedin]

vt - "Could it be that Cushing being the largest hub is a leading indicator and draw downs or builds there are usually followed by the rest or the facilities." My instinct is no. Each of the 5 PADDs (which cover the entire country) have not only unique regions shipping oil to its storage facilities but also different groups of refineries that are supplied by those PADDs.

Look at the distribution of the different PADDs. How would activity of PADD 1 be affected by activity in PADD 5? Even the impact of Cushing on PADD 2 is questionable. Much of Cushing PADD 2 storage ends up at Gulf Coast refineries while there are a concentration of refineries in northern PADD 2 around Illinois.

https://www.eia.gov/todayinenergy/detail.php?id=4890

Well for one thing PADD 5 doesn't export any oil while Cushing on the line between PADD 2 and PADD 3 both imports and exports oil handling about 42 percent of all the oil that is shipped over PADD lines. PADD3 has a higher volume but is spread out in three or more areas. A look at the pipeline map here shows you the central hub position Cushing has.
https://www.watershedcouncil.org/pipelines-101.html

[ROCKMAN]

vt - "Well for one thing PADD 5 doesn't export any oil while Cushing on the line between PADD 2 and PADD 3 both imports and exports oil handling about 42 percent of all the oil..." And thus the majority of the oil shipped to US refineries does not come from Cushing. For instance the oil on the west coast (PADD 5) is accumulated from Alaska and CA oil production (the combined volume of which is as much as the #2 producing state N. Dakota) and is refined in Washington state, the 5th largest refinery concentration in the county. And those refineries supply CA, the second largest oil consuming state in the country. So how does activity at Cushing impact what’s going on in CA? And visa versa?

Some may have already guessed why Cushing is the center of so many reports. For instance: “CME Group (formerly known as NYMEX) is amending its contract specifications in order to ensure its quality parameters conform to the oil industry standards that govern the common stream specifications for WTI type crude oil which is deliverable against NYMEX Light Sweet Crude Oil futures contract in Cushing, Oklahoma.

IOW the futures market is not directly affected by any of the activities in the other PADD's. BTW a significant amount of the oil going into Cushing is not light sweet WTI (on which futures contracts are traded) but nasty 23 API dilbit from Alberta. Dilbit that has to be blended even more with light oil/condensate before it's of any use to the refineries.

[vtsnowedin]

Well of course there are several markets and several grades of oil just like there is more then one wheat market and more then one type and grade of wheat but unless you are a big customer of one type like Dominoe's watches the wheat used to make pizza dough or a refiner that makes plastic feed stock you are not going to look at each market or grade.
The New York traders have chosen to watch and deal in Cushing's supply and price and it works for their purpose.
At any rate WTI at Cushing just passed $67 a barrel and that tells you the way the total oil market is moving today.

[Outcast_Searcher]

At any rate WTI at Cushing just passed $67 a barrel and that tells you the way the total oil market is moving today.

Brent and WTI have been in a pretty tight correlation recently, aside from a relatively big spike in the spread (Brent minus WTI) in early 2015. For ordinarly folks watching general oil product prices like gas or diesel, a market like WTI is an excellent indication of what's happening something like 99% of the time, over any reasonable timeframe.

https://ycharts.com/indicators/brent_wti_spread