Crude stocks increase trumps expectations.
This morning the DOE reported its largest build in crude oils stocks since September, a whopping 2.1 Mbbls increase which beat out all but two of the fifteen economist estimates in Bloomberg’s survey. Traders’ knee jerk reaction was bearish with a capital B, wiping out all of this week’s gains in early morning trading to push prices below $76.50 from yesterday’s 79.04 high.
Could this spell the end of crude’s run towards $80 and beyond? Average November stock levels in 2009 are at their highest point since 2006, almost 7% higher than 2008 and a whopping 17% above 2003. More bearish news comes from the U.S. Commodity Futures Trading Commission, which reports that non commercial traders (that is, Hedge funds, market makers and other large speculators) have been decreasing their net long position since October 27th. Put simply, the hedge fund gurus and their smart money friends have started taking more short (bearish) positions compared to long (bullish) positions over the last few weeks.
Total mogas stocks also increased to bring the November average 6% above last year, and prices dropped more than 3% within hours of the DOE’s release. It’s not all bad news though; the heating oil contract was sold along with the rest of the complex but according to analysts at The Schork Report, we may see a recovery once traders start examining total distillate stocks, which decreased for the third consecutive week.
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Stephen Schork is the Editor of, "The Schork Report"and has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.