Fraudulent Claims of Impending Shortages

NYMEX Oil Complex Settles Higher Despite Bearish EIA Data
July 05, 2007
By John Troland, Tom Waterman

Houston, TX - The NYMEX oil complex finished the day higher despite EIA inventory data for the week ended June 29 indicating inventories of the three major NYMEX energy components were sharply higher than the previous report.

Crude oil stocks were up a surprising 3.1 million barrels with gasoline and distillate stocks higher by 1.8 and 1.2 million barrels respectively. We cannot believe anyone would suggest the data was anything but bearish, yet those claiming prices are too low due to imbalances in supply and demand proved us wrong. It is obvious that those wanting higher prices are not looking at fundamentals but are again raising unfounded concerns that soaring demand is outpacing supplies.

The cheerleaders continue to talk about gasoline and how "dangerously low" inventories are. Well, the summer driving season is here and there are no lines, no outages, no indication of potential outages, or any other reason to think for a moment that gasoline is tight. In fact, the latest EIA report brings gasoline inventories up to 22 days of supply for the first time since the end of March. And inventories are still building at a time when stocks are usually drifting lower.

One of the reasons for the early jump in values this morning was that attacks have begun again in Nigeria, after the government had negotiated a truce between itself and militant factions. To suggest that old story is having an impact on world oil supplies, which we hear are "abundant," is strictly self-serving rhetoric in the absence of any real supply issues.

As we have written for months, while Nigeria is having problems in the Niger Delta, production remains close to its OPEC quota and is expected to remain that way well into the future. Those wanting higher prices act like we are about to run out, again ignoring the fact that we have 354 million barrels of crude in primary storage with a mere 690 million barrels stored in government salt domes. The fraudulent claims of impending shortages are used for one reason -- to make more money and nothing else.

Today's trading session, once again, defies a logical explanation other than those wanting higher prices have the money to be successful despite fundamentals that suggest refiners will keep supplies of finished products adequate for the foreseeable future. [...]

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