Crude Eases Slightly
Crude oil is slightly easier in early trade Wednesday, down just over half a dollar at around $48/barrel, after breaking above $50 at one point yesterday.
US Energy Dept data due out later today is expected to show crude oil and gasoline stocks each rising by around 1 million barrels last week as US consumer demand remains weak.
US gasoline consumption fell 3.5 percent last week to a two-month low as the U.S. recession reduced demand, according to MasterCard Inc.
Still, the ongoing problems in the Middle East and the Russian dispute with Ukraine over gas, coupled with OPEC cuts starting to filter through seems to indicate that $45-50/barrel is the right kind of level for oil at the moment.
A twelve month carry on MYMEX is still showing a premium of around $15-16/barrel, which is more than sufficient to cover finance and storage. This is especially so with interest rates effectively at zero and freight costs still so low. There are reports of enquiries in the freight market at the moment for up to ten supertankers, each capable of storing 2m barrels each, to simply load up with crude an sit awaiting further instructions.
It might sound a crazy way of going about things, but the economics really do stack up. Whilst this situation exists it's difficult to see a great deal more downside to crude.
US Energy Dept data due out later today is expected to show crude oil and gasoline stocks each rising by around 1 million barrels last week as US consumer demand remains weak.
US gasoline consumption fell 3.5 percent last week to a two-month low as the U.S. recession reduced demand, according to MasterCard Inc.
Still, the ongoing problems in the Middle East and the Russian dispute with Ukraine over gas, coupled with OPEC cuts starting to filter through seems to indicate that $45-50/barrel is the right kind of level for oil at the moment.
A twelve month carry on MYMEX is still showing a premium of around $15-16/barrel, which is more than sufficient to cover finance and storage. This is especially so with interest rates effectively at zero and freight costs still so low. There are reports of enquiries in the freight market at the moment for up to ten supertankers, each capable of storing 2m barrels each, to simply load up with crude an sit awaiting further instructions.
It might sound a crazy way of going about things, but the economics really do stack up. Whilst this situation exists it's difficult to see a great deal more downside to crude.