A headline from Platts summed up the NYMEX reaction beautifully…NYMEX crude jumps $2 on bullish EIA data. Refinery throughputs plummet on weak margins, seasonal maintenance.
We love it. That one simple headline succinctly sums the NYMEX paradox. Let’s dissect the diagram of this sentence, shall we?
Refinery throughputs plummet…
What does that mean to you? Let’s not overcomplicate this. To us here at , that means exactly what it says. Throughput, the amount of crude oil being put through the complex is plummeting.
…on weak margins…
Okay, we get it. Refiners cannot make money on boiling oil. Therefore, they have stopped pushing oil into their tea pots… because they can’t make any money doing so.
Thus, even if refiners could pass on their exaggerated input costs to a vocationally challenged consumer, demand would be muted anyway.
Yet, somehow the EIA data is “bullish”. Why else would crude oil jump $2?
So who exactly was clamoring to own crude oil yesterday? The refiner, who cannot make any money with the crude oil already on hand, or Wall Street?; because, after all, crude oil is an inflation hedge and, oh yeah, those darn Chinese can’t get enough of 530 yuan oil? Right?
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.