It isn’t good. Inventories keep falling, the SPR is at multi-decade lows and supply for multiple reasons is NOT being replaced or increased.
Q4 2021 hedge fund letters, conferences and more
I’m not worried about whether oil is going to $100 or $150, but how long it will stay there and will it tip us into recession. Based on what I am seeing, there is very little if any potential supply relief on the horizon. This means higher prices for longer which is the real problem. $150 oil for a week or two is inconvenient, but not disastrous. $110 oil for 6-8months becomes a significant problem.
“Davidson” submits:
Total US Crude Prod unchanged at 11.6mil, Total US Inv falls 4.4mil BBL(fall of ~1.8mil in working inv & ~2.5mil SPR), US Crude Imports rose 1.9mil BBL/Day, US Refining Inputs unchanged
- US Gasoline Inv fell 1.5mil BBL
The US Oil Situation continues to reflect declining inventories as somewhat higher drilling rig counts only keep US Production stable. A headline below is indicative. The title of a report this morning reflects the confusing environment the industry faces. At the moment, wildly conflicting, often interlaced with derogatory and threatening, commentary by policy makers are holding producers on the sidelines and resulting in their extraction of working capital out of inventory till the road ahead is clearer. Call it the issue of “mismatched maturities”. Oil/gas producers must commit CAPEX with a 10yr even longer perspective while policies that have changed weekly depending on who seems to be the primary speaker.
