As I watched CNBC today, I saw a friend of mine Joe Petrowski, CEO of Gulf Oil and Cumberland Farms say that he thinks the market could move into the $20 a barrel range with $1.00 gas prices. I like Joe but I don’t know if this market will get much below the high 20 dollar a barrel range. I predicted that it would and it would happen at the end of this week but I might be a few weeks early in my prediction.
Venezuelan President Hugo Chavez said in a state radio program yesterday that he is ready to trim crude output further in order to boost oil prices. Despite the strong front that OPEC is putting up, I do not believe for a second that they are staying with their quotes. Listen if these country’s say that can’t make money at $70 a barrel crude under normal product, how can they make money at $40 a barrel and producing less oil? My view is if they are even close to the production cuts they are all on the high side of them.
The EIA data is forecast to show that U.S. crude oil stockpiles rose a further 2.7 million barrels last week, the fifth straight week of gains.
Colder weather is expected to help draw down distillate stockpiles by 800,000 barrels but that is not nearly enough to give the market any boost. Let’s face it, we are in the dead of winter and there should be draws.
Gasoline stockpiles are likely to have risen by 1.3 million barrels.
“Unless OPEC production cuts in January were substantially greater than what we have assumed, it is still too early to be calling an end to this current bear market,” Goldman Sachs said in a research note.
Oil’s supply/demand picture remains weak, pointing to a large counter-seasonal stock build in the United States and extremely weak demand in China, the world’s second largest energy consumer.
So the fuel beat will go on for another day. With EIA Data due out tomorrow and a snowstorm hitting the Northeast, who know what will help. One thing is for sure, it’s always interesting.
Gain instant access to the ebook!