Bearish Sentiment Priced In?
The futures contract for January 2015 has gone from $102 a barrel in July to $57 a barrel today, a $45 dollar a barrel discounting of price in less than six months. Much of this move is based upon bearish sentiment and future expectations for oil supplies along with bearish headlines coming out of OPEC Members and the exiting of the long side of the market (Players stepping away) and a huge short trade pushing prices lower. But the question is has too much bearish sentiment been priced in too fast? Well let`s look at some EIA Inventory Data for trying to put some actual data footholds if you will on the subject.
US Oil Inventories
The US has 380 Million Barrels of Oil in storage right now, and this time last year the US had 375 Million Barrels in storage, yet the futures price was $97.65 a barrel last year at this time versus $57 and change as of Friday. That is roughly a $40 re-pricing of the commodity on a little US Inventory difference on the WTI contract. In fact just a couple of weeks ago we actually had less US oil Inventories in storage, as from week to week the year over year comparisons (noise) can move the needle in either direction (last week`s EIA Report showed a surge in Imports) this can be reversed the following week.
Let us dig a little deeper as this is the slow period for the oil market, after the summer driving season and before the heavy cold weather hits increasing demand for heating oil and other energy products in the heart of winter. On July 4th the US had 382 Million Barrels of Oil in storage, so actually more oil in storage at the heat of the summer driving season than we do today at the weak part of the oil market in terms of demand, but yet price has gone down $40 a barrel on essentially the same level of oil supplies here in the US.
Another interesting tidbit regarding supplies is that the US had its highest level of supplies both at Cushing Oklahoma and overall when the futures price was around $115 a barrel due to Middle East disturbances, i.e., much more worrisome supply and demand issues here at home with high prices eating into consumer demand for gasoline and a less robust economy.
