ENERGY PRICES WERE MIXED ON WEDNESDAY… natural gas futures in New York moved lower, while the liquids complex managed to wait out the DOE’s (bearish) weekly inventory report in favor of the FOMC minutes.
Got that? You know the fundamentals have been relegated to the backburner when the FOMC trumps the DOE!
The incentive to hoard barrels, rather than burn them has increased through the peak of the summer driving season… with the ability to sell into the curve, the market is paying you to carry inventory forward.
If there was real demand in this market, that could not happen.
Beware the ‘second derivative’… yikes!
According to the FOMC’s most recent statement, a consensus is growing that the recession has ended. Thus, the oversupply in the oil markets might not matter. Mind you, demand is still in the toilet. In this vein, the ratio between wholesale petroleum supplies and sales in June ballooned to .45 or well above seasonal norms (see Today’s Chart of the Day in today’s issue of ).
Bottom line, demand for energy is poor, ergo, despite the pullback in refinery output, supplies are rising. That is bearish. But if the Fed’s “bullish” consensus takes hold, that might not matter.
Stephen Schork is the Editor of, and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.