Food for Thought

Just to establish what is impacting the oil price surge and what is not I would like to mention two items. During the last hour or so the following news hit the market:

 

·         The EIA will not renew any further contracts for the Strategic Petroleum Reserve beginning in July. The fill rate has been running about 70,000 bpd or about 0.3% of US consumption.

·         The Saudi said they would increase production by 300,000 bpd next month based on customer requests.

 

Since the news came out the market is still trading $2.50/bbl higher for WTI, $0.0825/gal for HO and $0.0675/gal higher for RBOB gasoline. Another exemplification of the fact that:

 

·         Whether or not the EIA puts 70,000 bpd into the SPR or not it is insignificant and has no impact on price

·         The Saudi’s increasing production 300,000 bpd has no impact on price since the surge in prices has little to do with fundamentals.

 

The market still is not ready for a downturn as the spec/investment flow continues to maintain a bullish market sentiment and discounts anything that is not bullish.

 

Dominick

 

Dominick A. Chirichella

Energy Management Institute

tel 646-202-1433

tel 845.368.3904

fax 801.383.7510

dchirichella@mailaec.com

www.energyinstitution.org

www.advancedenergycommerce.com

 

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