This Week in Petroleum 9-12-07

Gas inventories declined marginally. Oil stocks declined more than expected, but are still at the top end of historical ranges. A decline in active refinery capacity was also another factor. Crude topped out at $80.18 today before settling at $79.91. (The text of the EIA's weekly report can be found here).

Discuss. (There's a couple of links under the fold.)

But as Steve Hargreaves at CNN says:

In its weekly inventory report Wednesday, the Energy Information Administration said crude stocks plunged by 7.1 million barrels last week.

There have been concerns that OPEC production cuts from earlier this year and rising demand for oil have diminished crude supplies worldwide.

Still, EIA said crude inventories in the United States remain above average for this time of year.

But traders are focusing on the fact that crude inventories are below last year. Plus they say that while summer driving season sparks big demand for gasoline, it's actually winter that sees the largest demand for crude as people worldwide use heating oil and power plants burn oil to provide electric heat.

"Crude stocks are not crazy high anymore," said Antoine Halff, head of energy research at Fimat in New York. "Plus, heating season is ahead of us."

As Robert said last week (and I think it's safe if I echo it again this week...):

The next few weeks will be interesting. We are at the end of peak driving season, but we will soon be heading into fall turnaround season where gasoline production will drop. Winter gasoline is also right around the corner. This time of year typically sees gasoline prices fall (prompting conspiracy calls when it also happens to be an election year) but with inventories where they are we probably won't see that typical price drop. In my opinion, we can't afford to see it. Last fall prices fell, and demand picked up. We can't afford for demand to pick up with inventories setting where they are.

I predict that prices will continue to rise. I think they have to. I also think we will see the ramifications of present inventory levels for quite some time. On the other hand, we did go into the end of 2003 with inventories in this range, so we do have some history suggesting that levels can recover without requiring sharply higher prices. But don't bet on it.

I have a question for those in the oil industry: do you feel the oil market is well supplied? Do you feel that this oil price is a result of scarcity or is it more of psychological factors?

I have a working hypothesis I'd like to discuss: refiners find the crude price too high and tend to postpone orders (as possible) until it gets lower. This further drives inventories down, bringing prices artificially higher.

Don't get me wrong, I am all into peak oil and the impending oil scarcity. But I think that if we cry wolf again and the price plummets in several months we could lose even more credibility. PO is not a couple of months event, it will unfold for quite a few years...

A copy of my post on the Drumbeat thread (which I posted prior to today's EIA numbers):

I'm going to write a little missive for Graphoilogy on this topic, which I have addressed before, to-wit, refiners will not let their crude oil inventories drop below critical levels.

If refiners can't afford to bid the price of crude up enough to keep their inventories in a comfortable range, it stands to reason that they would reduce crude oil input, thus reducing product output.

So, I expect to see crude oil inventories more or less staying in a "comfortable" range (48 to 96 hours of supply in excess of MOL), with declining product inventories, and flat to falling refinery utilization numbers.

Crude oil inventories are at 80 hours of supply in excess of MOL. IMO, what the recent (five year) crude oil inventories show are just minor fluctuations within a narrow range above MOL, as the industry has gone to a Just In Time inventory system.

Crude oil inventories are at 80 hours of supply in excess of MOL. IMO, what the recent (five year) crude oil inventories show are just minor fluctuations within a narrow range above MOL, as the industry has gone to a Just In Time inventory system.

Another reason for the continued increase in the price of crude might be that the temperatures along the northern tier states of the U.S. have been rather cold for this time of year. In fact, there have been many reports of record low temperatures, some below freezing.

If we see a colder winter than those of the past few years, how is the Just In Time system to respond, given that the source of any extra the supplies are several weeks away from demand?

E. Swanson

Hi LevinK,

I believe that the balance between supply and demand in the oil market is tight. The effective spare capacity of 2.85 mbd is comprised of undesirable 2.50 mbd heavy sour crudes from Saudi Arabia and Kuwait, and only the remainder of 0.35 mbd is desirable light crude (see IEA OMR June 2007 page 15, The oil price is due mainly to supply and demand factors and to a lesser degree, psychological factors.

The chart below has been updated for 0.5 mbd OPEC quota increase and for IEA Sep 2007 OMR

click to enlarge

From the IEA OMR report:

World oil supply fell by 430 kb/d to 84.6 mb/d in August, on North Sea and Mexican outages, plus lower Iraqi exports. Forecast non-OPEC supply remains 50.0 mb/d in 2007 and 51.1 mb/d in 2008. Saudi Arabia underpins 660 kb/d of OPEC NGL growth next year. Risks to 2008’s broad-based growth are biased towards the FSU, project delays and extended field outages.

The average world total liquids production, for Jun, Jul and Aug 07, is only 84.6 mbd, according to the IEA monthly data. OPEC’s quota increase and end of summer maintenance should keep supply just over 85 mbd for winter. Note that the IEA OMR Sep 2007 indicates a demand of just under 88 mbd for the fourth quarter of 2007 (Oct 07 - Dec 07). The next four months could be extremely tight for supply and demand.

The 660 kb/d of OPEC NGL growth next year (from IEA quote) and the 500 kb/d from Saudi’s Khursaniyah project have the potential to keep supply above 85 mbd for 2008.

For the most recent full forecast update please click here

The effective spare capacity of 2.85 mbd is comprised of undesirable 2.50 mbd heavy sour crudes from Saudi Arabia and Kuwait, and only the remainder of 0.35 mbd is desirable light crude...

Is this new, having so much of the spare capacity in heavy and sour? What's the history?

Much of the surplus heavy sour crude capacity was used from 2003 to 2006. The OPEC production cuts in late 2006 and early 2007 were mainly heavy sour crudes from Kuwait and Saudi Arabia.

In 2002 there was significant surplus capacity of both heavy sour and light crudes.

Here is a chart showing surplus capacity history.

click to enlarge

The simplest way to answer your question is to have a look at NYMEX futures for the next six months.

On 9/12 the close was as follows:

Oct 79.91
Nov 78.54
Dec 77.29
Jan 76.44
Feb 75.77
Mar 75.28
Dec08 73.39
Dec09 71.76
Dec10 70.76
dec15 69.93

The backwardation is pretty huge. No refiner in his right mind will buy "extra" crude above and beyond what they have to to keep things running. Holding it loses you $1.40/bbl vs. buying a future and swapping that for wet oil in a month. Not to mention the interest cost of holding wet oil vs just paying $5000/contract to buy a future as a place holder. Consider just how much those 330 million bbls of crude are worth in interest costs every year. At 6% I get $1.5 billion or so. Ouch.

So clearly the market is NOT well supplied. if it were, the market would have the contango shape where the front is cheaper than the back by the cost of storage, interest etc.

This story is a little telling. mentions peak oil a few times, in a realistic light, and how the traders no longer believe OPEC.

In one of Mad Money's early shows, Jim Cramer featured a list of past OPEC pledges about production, all of which were not honored. If I remember correctly, he called them "serial liars".

true but...

before others beside Saudi had spare capacity with which to cheat. Now Saudi is OPEC for all intents and purposes.

Wheat also hit a record today:

USDA Sees U.S. Wheat Stocks Dwindling

NEW YORK - Wheat prices surged to record highs Wednesday on expectations that rising global demand for U.S. wheat will deplete stockpiles to the lowest level in three decades - a situtation likely to drive up costs in the grocery aisle.

And the dollar hit a new record low compared to the euro. Compared to the record in 2006 (in dollars), the cost in € is about 10% less than last year. So, while oil may be more costly in $, it's not that way in €.

Over on the drumbeat thread, I wondered if ultra low gasoline inventories, versus high crude oil prices, in dollar terms, are an early sign that we may be beginning to lose out on the bidding war for declining world petroleum exports. What does seem odd is the low gasoline price.

What does seem odd is the low gasoline price.

And the low NG price -- but I suppose that's another subject.

No, it does make sense...because the gasoline price in the US is low, we are losing the bidding war. If the price were higher, we'd be winning the bid. Overall not surprising if we're tilting into recession.

who is outbidding the US?

Europe (not only EU), Japan, the net exporters, and BRIC.

On a feew months, I expect some caribean countries to also get into the team.

Chicken and egg issue. But I think people would/could pay more if they had to, so doesn't that mean the refiners could pay more for the crude? It still doesn't explain why the price is so low now - but it probably does mean it is temporary.

Question: do refiners have to borrow significant money to buy crude?

Production Declines Versus Net Export Declines

I have previously compared the final decline in Indonesian exports to the ELM, in terms of annual exponential decline rates. Well, take a look at the Texas production decline rate versus UK year over year changes in net exports (exponential decline rate per year).

Notice a slight difference?

This is why I think that it is a mistake to focus on total world production.

Texas Production Decline/UK Net Export Decline
(starting in 1973 and 2000 respectively, following 1972 and 1999 peaks):

-6.0%/Net Importer

what the gasoline market is telling you is that despite low ish inventories, no one is worried about running out of gas heading into winter. The market is allowing the refiners a small margin and that's it. But since distillate is much higher, refiners are still happy to run full for now. Gasoline is basically a byproduct at the margin if you can make $15/bbl on distillates.

Hello Calorie,

Thxs for the wheat info. Fertilizer prices are expected to accelerate too as their extraction, beneficiation, and distribution are directly linked to energy prices.

The Haber-Bosch nitrogen process is critical to food supplies, but if natgas gets depletion-scarce, then ammonia and urea prices will go through the roof.

If my Asphalt Wonderland had its act together: we would stop building suburbs, shopping extravaganzas, car-washes, and golf courses. We would be directing these funds into solar systems to power ammonia-making infrastructure from non-natgas sources.

Each passing day of our intense desert sunlight is another opportunity lost to harvest this ephemera, then convert it into optimizing long-term topsoil vitality. Such is life.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Rev. Dr. Shaw:

There were very few interstate natural gas lines in the US and none from the gigantic Texas and Louisiana fields to the north eastern US until 1948, when the Big Inch and Little Inch pipelines were purchased from the federal government by Texas Eastern Gas Transmission Company and converted to natural gas pipelines That's when gas began to displace coal because of ceap prices for power generation. (source: history of the Big Inch and Little Inch Pipelines, about a 50 page pdf, google it). As an example of cheap prices, I remember a lease I looked at in Nacadotches County, Texas about 2 years ago made in the 1940's and setting the minimum price for natural gas at 1/2 a cent per thousand cubic feet, or 1/60th of the then current posted prices for crude oil. It stuck in my mind because of the fantasticly cheap price.

When operators stuck dry gas, they just plugged the wells as dry. When there was condensate or crude associated with the gas, the operators would strip the liquids and flare the gas, resulting in fantastic waste. This still goes on worldwide, if you'll read Jerome a' Paris article in TOD Europe on building pipelines a couple of weeks ago he details a lot of this waste thats ongoing currently in the world and the inexpensive prices for gas in other regions of the world.

Besides building pipelines, lots of the Texas gas was used for making fertilizer and processes like manufacuring carbon black and also high energy processes such as aluminum and steel making. That's all been closed up now.

The answer for a lot of the stranded gas worldwide is to build things like fertizer plants where the gas is still cheap. Why the multinationals and investment banks aren't doing this is something I don't understand. ExxonMobil is building a huge gas to diesel plant in Qatar, but fertlizer is easier to store and ship than LNG.
Bob Ebersole

A little aside, the Tropical Storm is coming ashore right now in Halveston, and the gusts are reall rattling the windows!

Hello Oilmanbob,

Thxs for responding, but I am neither a Rev. or a Dr..

Gotta agree on the sad waste of Natgas, and how conversion to fertilizer is better than LNG processes. Recall my earlier postings on needed legislation to enforce fertilizer stock-piling to help send a Peakoil Outreach price signal to the unwashed masses.

I am unsure where Arizona gets most of it natgas; I am assuming it comes via long-distance spiderwebs from Texas and other Midwestern states. My guess is these webstrands will quickly become non-functional postPeak because midwestern farmers paying outrageous fertilizer prices and midwestern rural folk shivering through a cold winter will not put up with Arizonans' heating their jacuzzis, pools, and golf clubhouses for the annual winter 'wealthy snowbird' influx. The snowbird migration this year is predicted to be especially large and remunerative because of the Superbowl being hosted by my Asphalt Wonderland.

Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

The dollar sank to an all time low vs the euro

The greatest super debtor in the world.

The dollar sinking vs the Euro does not do much good. The greatest holders of Dollars is the Beijing government and dollar/yuan is being controlled by them.

Japan actually holds more U.S. debt than China. The UK is third, with oil exporting countries fourth. This page has a useful table showing the major foreign holders of U.S. debt:

I'm not sure we know who owns all those treasuries that are held in London.


I haven`t escaped from reality. I have a daypass.

Hong Kong is not included, but it is part of China and controlled by Beijing. Carribean centers: money source unknown.

Holders through London-UK: 405 billion - who are these people?

Total treasurey debt is $9 trillion. Your link accounted up for $1.5 trillion leaving $7.5 trillion unaccounted for. It is possible and quite likely that a lot of that is in foreign hands.

Hong Kong is not included, but it is part of China and controlled by Beijing. Carribean centers: money source unknown.

True but irrelevant; Japan's holdings are larger than those three put together.

Holders through London-UK: 405 billion

You read the wrong line - it's $190.1B

Total treasurey debt is $9 trillion. Your link accounted up for $1.5 trillion

"Grand Total 2218.7"

leaving $7.5 trillion unaccounted for. It is possible and quite likely that a lot of that is in foreign hands.

Not really; if it was, it'd be on the list of foreign holders of the debt.

Of the total debt, about $4T is held within various branches of the government - mostly pension and unemployment funds - so only $5T is held by the public. As the previous link shows, $2.2T of that $5T is foreign-held, meaning about $2.8T is held by Americans. That portion would include anyone who has investments in US treasury bills, for example, which many Americans own in things like money market mutual funds.

$2.2T is a lot of money, but it is just 15-20% of the US's GDP, so it's open to debate how much of a risk that is.

(in an attempt to get some more people to talk about this...)

Viewing the 2 graphs at the top, some things stand out to me:

1. Gas stocks rose to their highest point in February, then declined evenly to April or May.

2. Crude bumped in February, then in March rose evenly to a high in July.

Perhaps this is too simplistic, since I am not versed in the details of gasoline production, but it seems that gasoline production was reduced beginning in February and was not increased until May on the verge of the summer driving season. If gasoline production had been increased prior to May, then the remainder of the year would have been within the 5-year average.

So, to my untrained eyes, gasoline stocks and crude stocks are where they are right now because of what happened between February and May, not because of anything that has happened since. Of course, please feel free to educate my unschooled eyes.

"I was gratified to be able to answer promptly, and I did. I said I didn't know."

- Mark Twain, Life on the Mississippi

i am a peak oiler. but the current fundamentals do not support $80 oil. it just doesn't! the supply & demand picture hasnt changed that much from a year ago. summer driving season is over. hurricane season has been a dud and is near over...nothing big geopolitically...
the sub-prime markets is driving down the economy.

$80 is very very overpriced imho. i am convinced we will see $60 oil again this year.

And if the natives blow a few more Mexican pipelines then there will be a risk surcharge and it may go to 90$ even with no change in supply.

Billy: That is 80 US dollars-don't fall into the familar trap of thinking of the US dollar as a constant- as an example, in nine months it is down 11% vs the Cdn dollar. If it had held its value, that $80 oil price would be $72.


I don't disagree with you in principle (especially if economic growth slows or retreats in Q4 as is predicted--which Stuart's recent post speaks to), but I was just watching Fast Money, and commodities guru Dennis Gartman was on.

Gartman said we are in for some hard core backwardation (which basically means that the front end month futures price is higher than successive months' futures prices, indicating very tight markets--this is not how futures chains generally look) moves in the price up in the short term because we have broken out of the recent trading range. He didn't give a number though.

But then again, who the hell knows.

good lord, i just dont think the current fundamental picture supports $80/br today at all. yea we only have 19 days of gasoline supplies left....vs...last year at this time we had 22 days of gasoline supplies and prices were in the low 70's...
a change of 3 days in gasoline supplies causes a $10 difference in oil prices??? that's out of whack.

also current US crude supplies are above historical numbers. meaning, we have more oil sitting in a series of caves than usual. YEs i know we've been having drawdowns, but let's pull back and look at the whole picture...oil is not worth $80 today.

the market is overbought. geez, i feel sorry for the guy who bought a future contract at $80. what the hell is he expecting? oil to be $90 this year?! i find that hard to justify absent any significant supply hiccups. in which, case, the best that guy can do is $83 and make a measely $3/br but he stands to risk losing $10 if oil corrects itself back down to $70's. Yikes, not a good investment when downside risk is substantially higher than upside.

again, the market is made up of humans and people make bad bad bad decisions...

$80 may not be supported by the official story, but big institutional investors and "smart money" are starting to ignore the official story.

In response to OPEC's announcement of 1.4 million higher quota and 500,000 higher production, traders sent the price of oil to a new record high. The traders are betting their careers that OPEC is lying.

The chatter on the Internets lately is unlike what I've ever seen before. Another false terror attack on America would justify airstrikes on Iran. This would render OPEC's announcement moot, as the straits of Hormuz would be closed.

Your comments have a lot of words but boil down to just an opinion on your part. I would say that the guy/gal who bought the $80 contract was expecting a higher price.

Gasoline supplies are down to hours over MOL. Spot shortages in Iowa, ND. The price of oil may have to go a lot higher to get supply and demand into balance. Also look at the weekly status report. Crude and product imports are down this year through Sep 7 vs last year.

Fortunately there is still a lot of waste in the system (6000 lb personal vehicles to name one) and so the system will adjust with a sustained and smooth price signal.

There is far more to the story than US inventories. While US inventories may seem ok, there are oil shortages in parts of the developing world and growth from China is constantly putting upward pressure on prices. Yes you can maintain reasonable inventories, but in this market it is costing you $80 to do so. I can see oil hitting $150 if the US attacks Iran.

"a change of 3 days in gasoline supplies causes a $10 difference in oil prices???"

Always keep in mind that the relation between a comodity's price and its inventory is indirect, at best. Some times there even isn't one.

Inventories (above MOL) are mostly dependent of interest rates, speculation and savings. Price is dependent of offer and demand curves (that are producing costs, if you include returns, and willigness of people to pay the price).

All those factors are independent, except for speculation. But speculation depends of the derivative of price, not its direct value.

Even given that inventories and prices don't necessarily correlate, in this case they do. A drop of 3 days of inventory (19 days instead of 22) from last year would indicate a price of $81/bl based on a price of $70/bl for last year. 19/22 = .864; 70/.864 = 81. I might be getting the math wrong, but if not, this is a pretty straight correlation and doens't take into account currency differences at all.

- Scott
"Try sour grapes; you might like them."

The reality to the market is this. Over 2007 the demand has been outstripping supplies by about 1 million barrels a week over the entire year. Reserves have been in a generally steady long term draw. Supplies just aren't covering demand. Then, we hit this last week and reserves draw down 7 million barrels in one week. That means demand has been outpacing supplies by 1 million barrels a DAY! The Saudis respond by adding 500,000 barrels a day, or half our draw down. That is not going to cut it, and we are not even into winter yet.

In order for OPEC to meet US and Eurpoean demand they have also been cutting their contract orders to Asia. The system knows this. OPEC has not been meeting their calls on supply. The developing world is completely priced out of this market so they are not getting anything.

The traders are saying repeatedly that this year price is based on fundamentals. There is a very real and growing mismatch between demand and supply that began in earnest this year 2007.

Hurricane season is average so far, 3 hurricanes (2 cat 5) and we are just at half season.

Feb-->April and Sept-->Nov are the periods when refiners do their maintenance. So they stockbuild product before shutdowns so as to minimize buying in from others. This spring we had a lot of unplanned refinery fall downs as well leading speculators to push up prices in anticipation of real shortages. Didn't happen.

Basically refiners build stocks in gasoline over winter and heating oil/distillate over summer (counter seasonal to usage).

It is time to start implementing solar powered mobility networks. We have a preliminary agreement to build at the Mall of America. If anyone would like to help, we would appreciate the hand.

408.754.6259 (office)
612.414.4211 (cell)
It costs less to move less

Thomas Edison, 1910:
"Sunshine is spread out thin and so is electricity. Perhaps they are the same, Sunshine is a form of energy, and the winds and the tides are manifestations of energy.”

“Do we use them? Oh, no! We burn up wood and coal, as renters burn up the front fence for fuel. We live like squatters, not as if we owned the property.

“There must surely come a time when heat and power will be stored in unlimited quantities in every community, all gathered by natural forces. Electricity ought to be as cheap as oxygen...."

Historical Curiosity: I wonder what our world would look like today if Edison had teamed up with Eistein based on Einstein's 1905 proof of Quantum Mechanics based on the PhotoElectric Effect. Sunshine and electricity might cost nearly the same.

Solar isn't everywhere, it isn't dispatchable, and while running it is clean building it isn't.

I do hope for bulk production of flexible solar roof material to power low energy DC air conditioners and other innovations along these lines ... but I fear this stuff is over the horizon for our society - we'll tear stuff up in a big final consumption party rather than gracefully wind down.

PG wrote:

Gas inventories eeked up.

Actually, they decreased by 700,000 barrels, from 191.1 mb to 190.4 mb.

that's what I get for eyeballing a badly scaled chart. ;) duly changed.

Has anyone ever graphed the price of oil in bushels of corn? Or gold? We don't know if there is to little oil or too many weimardollars beyond our borders that people don't want to hold on to any more.


I haven`t escaped from reality. I have a daypass.

You can use this :$wtic:$gold

Not sure the dollar sign work (Yahoo msg board doesn't like it)
but $wtic is the oil-continuous-contract and I guess
$gold is for gold.

Thanks a lot for the interesting link. If you replace $gold by $XEU, you can have oil charts in Euro. Seems oil hasn't really gone up in terms of the euro over the last three years, even though the scaling of the y-axis is not clear to me...

[edit]Sorry, hadn't read the comments below when I posted, it seems I misinterpreted the graphs...

Actually, the rule of thumb for a barrel of oil in the 40's and 50's was that a barrel of oil was worth approximately one bushel of wheat. We got oil from the saudis and the saudis got wheat from us. Now wheat prices are at $8 per bushel and oil is $80 per bushel so ten bushels of wheat buy one barrel of oil.

Since oil is priced in U.S. dollars, and the dollar is declining against most other major currencies, is oil really increasing in price? or are we seeing "oil price inflation" due to the weakening value of the dollar?

So in 2003, 1 dollar bought 1 euro. Now it's about 50% higher (1.5 to 1)

in 2003 a barrel of oil was $30, and now it's $80.

From a European perspective oil hasn't really risen that much.

What's amazing about this is that given America's dependency on imports (both oil and other), why hasn't it gotten the economic snot kicked out of it.

I think the answer there is the dollars spent on oil and other imports has been re-invested back into America, fueling investment growth, housing growth, etc.

Does anyone think that oil will continue indefinitely to be priced in dollars? Would we move towards an "basket" approach to pricing?


Oil will continue to be priced in dollars. In wheelbarrels of dollars.


I haven`t escaped from reality. I have a daypass.

Remember that major oil importers such as Japan and China use dollars (almost always) to buy this stuff, and the value of Japanese and Chinese currencies have not changed against the dollar in the amount that the Euro has. The Yen pretty much trades in about a 10% window, and the Chinese currency is only allowed minimal freedom in movement.

"What's amazing about this is that given America's dependency on imports (both oil and other), why hasn't it gotten the economic snot kicked out of it."

1. Gas is still cheap. The average family has two cars, the average car is driven about 12k miles per year, and the average fuel economy is about 20mpg. So the average family is burning about 1200 gallons per year. At $2.80 a gallon, that's only $3,360 per year, or about $9 per day. It hurts the lower income families, but most people can still more-or-less afford that.

2. It takes a while for the extra cost to accumulate. It's taken around six years to go from $1 per gallon to $2.80 or so (according to Gasbuddy). That's a 30 cent per year increase. If you assume a linear 30 cent per year increase, our hypothetical family has spent an additional $6900 on gas over what they would have paid at $1 per gallon. When you add it up, it starts to become serious money. Now that people can't refinance to cover their credit card debt, it's going to start to really hurt.

3. I would think there's been a good deal of petrodollar investment, but I wonder if that will keep up with the uncertainty in the US market now. This Economist article, with information from the Institute for International Finance, concludes that about $300 billion in petrodollar money came to the US from 2002-2006. Quite an investment.

If in 2003 a barrel of oil was $30, and now it's $80, in Dollars it's risen by 166%. In Euros it was $30 and now it's $53.33, so it rose by 77%.

In Euros, oil increased in price by 66.66% as much as in Dollars.

Your claim that "From a European perspective oil hasn't really risen that much" doesn't hold true. It rose in Euros by 77% which is quite a lot. 66.66% as much as it rose in Dollars.

Brent oil (the largest of the benchmarks) was $26 4 years ago, and is now $76, or 190% higher. The dollar was 0.90 euro 4 years ago, and is now 0.72, or 20% lower.

Hence, oil has risen in euros (100%+190%)*80%-100% = 133%; it went for 23.4 euros 4 years ago and has risen to 54.7 euros. That's less than the 190% rise seen in dollars, but not much less.

Interestingly, the rise in petrol prices has been much more similar. Prices in Europe have risen from about $4.50/gal to $7/gal in the last 4 years, or 55%, vs. a rise of $1.90 to $3 in the US, or 58%. Presumably gas taxes have been rising along with the price, which would explain why oil consumption in the eurozone has been rising at only 0.2% over the past 5 years (compare to 1% in the US).

So I imagine it'll take a few more dollars per gallon before US consumption stops growing.

Hello TODers,

I heartily encourage you to read these well-written articles:
What's Behind OPEC's Production Hike?

Recent shifts in the oil market have driven the Saudis to want to cool things with a 500,000 barrel a day increase. So far, it hasn't worked.
From Tom Whipple:
The Peak Oil Crisis: A Meeting to Remember
Bob Shaw in Phx,Az Are Humans Smarter than Yeast?

Maybe this is a dumb question but help me out here.

I look at the crude stocks graph

and I see the little red dot indicating currents stocks at just above the blue shaded area indicating the average range.

I read the text and it says
" U.S. crude oil inventories remain above the
upper end of the average range for this time of year."
Okay, so far so good.

But I look at the stocks chart and it says US is at 322.6 and one year ago was 327.7.

In other words stocks are currently 5 million barrels lower than they were last year yet still above the average range.

So what exactly does it mean when it says "average range for this time of the year"?

Look at graph 12 on graphoilogy:

This text says it is average back to 1991.
Chart is a bit different but I assume data is same.

Fig. 12 Observed crude oil stock coverage values (NDFC): the shaded gray values are the observed distribution of NDFC values for each day of the year from all the available years (1991 to 2006) (dark means high probability, white means low probability). The lines are for the last 5 years.

That can't be the explanation for the blue area on the graph. If it worked that way the blue area would be 5 million barrels higher than it is.

More than that, in that little chart, it clearly shows oct 2006 with more than 330 mb, while the blue is almost 20 mb lower. So, blue trend cannot be 1999-2006.

Rethin: From memory, it is the 5 year average inventory for this week (I think).

The blue area ranges about from 320 to 280.

How is this a average?

I thought it was like galactic said, the total range of inventories for the last five years. But if that was the case the blue area should range from 327 down to 280.

If I average the inventory levels for the last five years for this week, wouldn't I end up with a single value, not a range?

Rethin: You're right- it isn't what I thought it was.

Go back and take a look at the Eighties numbers for US crude oil, both in terms of Days of Supply and total inventories.

As noted up the thread, the five year range, IMO, just reflects minor changes within a narrow margin just above MOL, as the industry has gone to a Just In Time inventory system.

The details behind the creation of the graphs are provided at Look for the link
“Methodology - Methodology of Average Inventory Levels.”


The graphs displaying inventory levels of crude oil and petroleum products, crude oil, motor gasoline, distillate fuel oil, residual fuel oil, and propane provide the reader with actual inventory data compared to an “average range” for the most recent 5-year period running from January through December or from July through June. The ranges also reflect seasonal variation for the past 7 years. The seasonal factors, which determine the shape of the upper and lower curves, are estimated with a seasonal adjustment technique developed at the Bureau of Census (Census X-11). The seasonal factors are assumed to be stable (i.e., the same seasonal factor is used for each January during the 7-year period) and additive (i.e., the series is deseasonalized by subtracting the seasonal factor for the appropriate month from the reported inventory levels). The intent of deseasonalization is to remove only annual variation from the data. Thus, deseasonalized series would contain the same trends, cyclical components, and irregularities as the original data. The seasonal factors are updated annually in October, using the 7 most recent years’ final monthly data. The seasonal factors are used to deseasonalize data from the most recent 5-year period (January-December or July-June) in order to determine a deseasonalized average band. The average of the deseasonalized 60-month series is the midpoint of the band, and two standard deviations of the series (adjusting first for extreme points) is its width. When the seasonal factors are added back in (the upper curve is the midpoint plus one standard deviation plus the seasonal factor, and the lower curve is the midpoint minus one standard deviation plus the seasonal factor), the “average range” shown on the graphs reflects the actual data. The ranges are updated every 6 months in April and October.