Oil prices continue to disassociate itself from the U.S. inventory picture... Despite an unexpected rise in Oil inventories, Oil is up over $2 as I write this.
The "recovery" might be anemic, but so are any increase in Oil production. I spoke at length with The Mad Scientist last night (he thinks I am all wet and Oil will hit $60 before $100... and he may be right... that's why we have buyers AND sellers... if there were only buyers, oil would already be over $100), and while there are a number of dangers to this "long oil" hypothesis of mine, the European debt crisis, a recession in China... it is my assertion is that spare capacity is NOT one of these dangers.
You see, I think the producers are producing FLAT OUT. I don't think that there is a single drop of "Shut In". Not F%^$#ing one (and if I am wrong I will be gone... eventually I will catch this thing, and until then my mentality is to NOT LOSE). If I am correct, then any further stimulus in the world economy (hint, hint.... QE2) will drive Oil prices higher - perhaps much higher. The world economy has been able to absorb $80+ oil for months now... the temptation to produce at these prices is simply too great to be passed on by the producers... ESPECIALLY since these VERY attractive prices have not cut into demand... it would appear to me that oil price elasticity is falling... my bet is that it appears that way to Saudi Arabia, Russia, Iran, the UAE..., too.
I have NO OTHER EVIDENCE other than the price mechanism... its not like I have friends with Aramco... and of course no big producer or big importer is going to say anything truthful... why would they? Both sides are in a "don't make waves" standard program of denial... and I don't fault them for this in any way. What should the POTUS do? Walk up to a microphone and say Oil supplies are going to continue to decline for the U.S.? If he did, Oil would be at $120 and never look back... with all of that outcome's concomitant effect on the U.S. economy and employment. And the producers? They never had it so good!
This cannot be analyzed using the disinformation coming out of the big exporters and importers.