RE: US Crude Stocks Unexpectedly Rise:23 Mar 2023 08:51
A million barrels here or there is within the noise for inventory. I understand that the hub at Cushing Oklahoma (where futures are settled) has a minimum operating inventory, and they spent 2022 within a whisker of that for months on end.
The US SPR refill is the elephant in the room as far as I'm concerned. They need medium sour crude, but shale is producing 10m barrels per day of light sweet crude that needs to be blended down of the US refineries run inefficiently and produce much less diesel. They need to import the oil to refill the SPR.
If they could refill it with Russian crude on the grey market at a $35 discount, then they would turn one hell of a profit having sold 100 million barrels or so over $100.
The market is pretty much in balance, and the Saudi's have more potential impact to the REDUCED output side than they do the upside for production. The world did not invest enough in E&P in the last 10 years outside of US shale (which is peaking) thanks to misguided green ESG nonsense, so we're stuck with existing fields that will decline and pushing them harder will exacerbate that decline rate. The chickens are coming home to roost in the medium term.
In the meantime, the bond market and yield curve say 'recession ahead' and have priced it in, as has oil. The broader equity markets on the other hand defy gravity still with no recession priced in.......except probably the oil and mining stocks which are on sensible multiples with FCF and dividend looking solid.
Trouble with banks, financials and the financing of 'growth' knocked oil the hardest and it hasn't bounced back like the broader index. Bonkers stuff. What a time to be alive.
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