U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.8 million barrels from the previous week. At 335.6 million barrels, U.S. crude oil inventories are above the upper boundary of the average range for this time of year. Total motor gasoline inventories increased by 5.4 million barrels last week, and are above the upper limit of the average range. Both finished gasoline inventories and blending components inventories increased last week. Distillate fuel inventories increased by 3.0 million barrels, and are above the upper boundary of the average range for this time of year. Propane/propylene inventories increased by 1.3 million barrels last week and are above the upper limit of the average range. Total commercial petroleum inventories increased by 8.0 million barrels last week, and are above the upper limit of the average range for this time of year.
That last line, the 8 million barrel increase? And the "above the upper limit of the average range"? Those 2 data points are not supportive of any meaningful expansion in GDP in the recent past. The question of whether or not it is supportive of Oil prices in US$ terms is a more complicated story, and the short answer to that is "No". Please note that "not supportive" means nothing in the data would lead me to go long, but that does not mean that the price will not go up (just to make me look bad), it just means in the short run it will be without me.
The Fed says that economic activity has picked up in its report today... and it has, but only because the rate of decline that the economy experienced last year could not, by mathematical necessity, continue. Nothing in energy consumption, rail traffic, the Baltic Dry Index, etc... is giving me a warm and fuzzy feeling. That, too, does not mean that equity prices cannot extend their rally... they can. If you throw enough money at any asset class prices will rise.
There is still a great deal of government stimulus money waiting to be spent, and that will have an inflationary pressure for at least a couple of years, and we might yet "get" another stim pak from the economic geniuses in D.C. Destroying the nation's currency by printing and borrowing and spending (remember "tax and spend"? How quaint.) will actually make us feel better in the short term, very much the way a heroin addict feels just before he dies from an overdose.
The year over year decline in Oil imports appears to be leveling off in the mid 8% area. It will be very tough for the US economy to experience any REAL GDP expansion without an uptick in Oil supplies and consumption. Ergo, any increase in equity prices will have to come from stimulus or multiple expansion... or an increase in Oil supplies.
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I think we are passed the point of a financial collapse brought on by a banking collapse (despite the fact that there is another wave of foreclosures about to swamp the banks... and no, I am not bullish on the banks, or should I say "Bank", the Fed is really the only bank we have). The various Central Banks and national treasuries have shown they will do whatever is necessary to destroy the value of paper money to shore up the banks. Nor will a collapse come from a default by the U.S. Treasury. No, the next, and final, financial collapse will come from a currency crisis in the form of the end of the US$. While it could come sooner, I would guess that the final wipe out of the US$ will come sometime between 2014 - 2019. Somewhere in that 5 year period lies, in my opinion, the highest probability of a political/currency crisis in the U.S. that will absolutely, positively spread through out the world in devastating fashion. Of course, as in all probability theory of certain outcomes with uncertain timeframes the distribution of probability will be on a bell graph, with standard deviations emanating from the peak of the graph left AND right. That means there is a small likelihood that this could take place tomorrow, with a much higher likelihood of occurrence in 2014-2019, and then a small likelihood that it takes place sometime thereafter.
And, yes, I firmly believe this to be the most likely outcome and timeline, and, no, I am not happy about it, am not wishing for it, or hoping that I am correct. If the data changes, I will change my mind on a dime.
What could accelerate this? A rapid decline in Oil imports into the U.S.
What could prevent this? Moving Federal, state, and local employees AS WELL AS the Social Security and Medicare eligible age to 72+, ending unemployment insurance, cutting the military budget by 80%, and discovering a new Saudi Arabia every 2 or 3 years, et al... piece of cake, right?
Right.
Greg