Oil Is Diving After the Biggest Inventory Build in 14 Years

[Purveyor]

Source: Bloomberg

by Tom Randall
10:44 AM EDT
April 8, 2015

America's oil in storage just hit another record after rising by the most since March 2001. West Texas Intermediate crude is down about 4 percent today.

Oil Prices Tumble


Stockpiles rose 10.95 million barrels, or 2.3 percent, to 482.4 million barrels last week, the EIA reported today. Analysts had expected an increase of 3.25 million barrels. The amount of oil the U.S. is cranking out also edged up, to a rate of 9.4 million barrels a day.

Investors have been closely watching the oil gather in storage tanks, which has been rising steadily since the oil-price crash started last year. This was the 13th consecutive increase in crude inventories, the biggest streak going back to 1983.

Stockpiles are more than 25 percent above their five-year average. Inventories aren't likely to max out, but even the possibility of coming close is adding pressure to an oversupplied oil market.

Read more: http://www.bloomberg.com/news/articles/2015-04-08/oil-is-diving-after-the-biggest-inventory-build-in-14-years

[Larry Engels]

1. What is causing this inventory build-up?

Just asking for theories. I know US production has increased, and Iraq is online now, but that doesn't explain it.

[Purveyor]

2. Well there is this: Saudi Oil Output 'Hits Record High': Minister

Saudi oil production reached 10.3 million barrels per day in March, Oil Minister Ali al-Naimi has said, a figure that is the highest on record.

"Average daily output hit 10.3 million bpd in March," Naimi, cited by the official Saudi Press Agency, said Tuesday night.

That was up 450,000 bpd on February and comes at a time of increasing competition for market share and as oil prices continued to drop.

The highest previous record was registered in 1980, at 10.285 million bpd, according to the US Energy Information Administration.

more...

http://www.france24.com/en/20150408-saudi-oil-output-hits-record-high-minister/

[Larry Engels]

3. So is Saudi acting independently of OPEC?

Usually they try to turn the faucet down to keep the price up.

[magical thyme]

7. also, this is forcing the frackers to frack their highest producers like crazy to keep the cash flow

Last edited Wed Apr 8, 2015, 04:50 PM - Edit history (1)

going and stave off bankruptcy.

Long term, it will drive most out of business and then they won't be able to get capital to re-start when prices spike again.

[bl968]

8. Institutional Speculation in the comodities Market

'Perhaps 60% of Today's Oil Price is Pure Speculation ...
How Goldman Sachs Created the Food Crisis
Not Just Goldman Sachs: Koch Industries Hoards Commodities as a Trading Strategy
How Koch Became An Oil Speculation Powerhouse
The real hunger games: How banks gamble on food prices – and the poor lose out

Each and every one of us is paying a speculators tax on the food we eat, and the energy we use.

"When oil prices dropped from a record high in July of 2008 to record lows in December of that year, Koch bought up the cheap oil to take it off of the market. Koch leased a number of giant oil tankers, including the 2-million-barrel-capacity Dubai Titan, to store the oil offshore. The decrease in supply increased the price for consumers that year, while Koch took advantage of selling the oil off later at higher prices."

I think that non-producer participation in the commodities markets by companies should be banned outright or severely limited.

[Sen. Walter Sobchak]

9. The US is producing too much light crude

We don't need it and we can't export (most of) it. All the while US refiners still need to import heavier crudes.

[djean111]

4. Don't know about the rest of the country, but here in the Tampa area, even though there is so much

oil stockpiled, the price at the pump rose from 2.05 or whatever to 2.40, more or less, and is holding steady.
I seem to remember that the recently deceased head of Saudi Arabia was on record as not wanting to cut down on production, in order to drive other oil producers who did not have such deep pockets, out of business.

[ChairmanAgnostic]

12. they have systematically cut the number of refineries

putting a chokehold on supply. When the California refinery went down (small explosion), all prices across the nation jumped up.

This was done by design, not accident.

[angrychair]

5. Saudi Arabia is using its leverage

To crash the fracking market. The sweet crude supply has very likely, by many reports, already reached peek production. Places like SA have to do whatever they can to force cheap, but dirty, oil vendors into bankruptcy so that they can maintain their market share as long as they can produce. On the positive note, for the time being, it makes drilling in places like the Arctic Ocean or any deep sea drilling, not worth the cost.

[magical thyme]

6. damn. just bought 200 gallons at 2.25 to fill my oil tank. I should have waited a bit longer

but was afraid I'd run out if I waited until next week. also was afraid price would suddenly spike.

[NickB79]

10. Oil rig counts in North Dakota have been plunging in recent months

http://www.upi.com/Business_News/Energy-Resources/2015/03/30/North-Dakota-rig-count-continues-fall/5421427720202/

BISMARCK, N.D., March 30 (UPI) -- The number of rigs deployed in oil-rich North Dakota dropped more than 2 percent from last week as spending cuts take their toll on development.

North Dakota's rig count last week dipped below the 100 mark for the first time in five years as oil companies spend less on exploration and production because of low crude oil prices. In February, Continental Resources, one of the largest drillers in North Dakota, said it was "deferring" some operations in the state's Bakken shale reserve area to cope with the low oil price environment.

In its first report for the week, the state government reported the number of rigs actively exploring for or producing oil and natural gas was 96, down from the 98 reported last week.

More than 90 percent of the state's oil production comes from Bakken shale. In January, oil production was 1.19 million barrels per day, a 3 percent decline from the previous month. The state's all-time high was around 2 million bpd, reached late last year.

[mahatmakanejeeves]

11. Oil and Gas Jobs Take a Hit in the March Jobs Report

Oil and Gas Jobs Take a Hit in the March Jobs Report

Economy
11:40 am ET Apr 3, 2015

By Jeffrey Sparshott

Lower oil prices are taking a toll on employment in the oil and gas sector.

Employment in mining, a category that includes oil and gas, fell by 11,000 in March. So far this year, the industry has lost 30,000 jobs. It added 41,000 jobs in 2014.

Support services include companies working on a contract or for set fees and may be the easiest to add or cut when times get tough.

The Labor Department on Friday said mining sector employment losses in the first quarter of this year have been concentrated in support activities.
....