Wow! If you are a bull or a bear you can be right in the same day in this market!
We picked up 140 points right out of the gate but we were not buying it ahead of the oil inventory as we expected shenanigans today. AT 9:34 I said to members: "Not buying into this rally so let’s be patient on new plays. That’s 300 points in 24 hours and I want to see 11,450 hold for a bit and 8,500 NYSE would be nice. We’re probably going to drift into oil inventory but a nice build there that sends oil below $120 and this market could be off to the races. They are predicting a build in product of about 3M vs a 1.5M draw so we need to do better than that…. "
Sadly, we did not do better than that. Despite oil hitting $121 and gold falling below $900 at 10:05 I said: "Now we’re looking better over 11,500, if we can hold this and get back to NYSE 8,500 all we’ll need is the Nasdaq to come around but they are looking pathetic, especially GOOG so I’m still not excited." At 10:35 we got flat crude numbers (-81K vs -1.3M estimated) a 2.4Mb build in distillates and a 3.52Mb draw in gasoline. That netted out to a draw of just over 1Mb but it was shenanigans indeed at the bulls ran wild and stampeded the market up over $4, all the way back over $126 on NOTHING!
David pointed out that the EIA numbers showed the lowest refinery utilization rate in history at 87.2%. With 20M barrels of daily consumption, that 13% of under 100% utilization means every day the refiners are not producing 2.6M barrels of crude that they could at their theoretical capacity. It’s amazing that they can’t manage to keep their refineries up and running since XOM (who is a major refiner) is about to announce that they made $11Bn+ last quarter by withholding gas from the American people and jacking up the price to record levels.
Those same EIA numbers show that, while the refiners are busy supplying us with less product than ever, our imports of fuel products are also down 834,000 barrels a day from last year, accounting for 5,838,000 LESS barrels a week of gasoline and distillates imported into this country than this time in 2007. So when CNBC tries to tell you that the draw in gasoline indicates that US drivers are willing to snap back and change their habits back to waste the second gasoline dips 10 cents, it is very hard to say whether they are hopelessly incompetent talking heads who wouldn’t know a fact if it bit them in the ass or evil, manipulating bastards who have sold their country down the river by purposely lying to line the pockets of their corporate masters. Really, it’s a tough call…
Meanwhile, total stocks of fuel are UP 2.7M barrels from last week (see bottom of EIA data) at 1,692,000,000 barrels of fue (and remember, we "only" use 20,000,000 barrels a day and 9M barrels are produced domestically and another 6M come from Canada and Mexico so the 5Mb we import from other countries would take 338 days to deplete our fuel stocks even if it were completely cut off tomorrow). Up 2.7M barrels when we are importing 834,000 x 365 days = 304M barrels a year less petroleum than we did last year is pretty good I think.
So we struggled with what to do as the market tanked and 12:28 I said: "Well we still can’t take even $123 oil. They are spiking to $124 (USO $100) and if they make it we’re really screwed. I’m not too inclined to bail on this right now as clearly oil shot up and the market fell down so we’re still down on a single issue but it is the biggest issue." A half hour later we cheered up and took out our Google callers and by 1:15, after much discussion in member chat, I decided we weren’t going to fall for the BS and said: "I’m going to go out on a limb here and say it’s safe to go back in the water. Buying out callers I’m up more than 50% on across the board. There is nothing I see other than oil driving the market down and that itself was a baseless pump and if arrests are not made I’m going to be really pissed."
So this will be a real test of my fundamental premise on crude. I say the move was a BS bounce pumped up by a very mediocre inventory report and Congress’ inability to pass the anti-speculation bill with the aid of President Bush who said the bill would be veto’d and gave the oil traders carte blanche to drive the prices back up today. I’m not going to say anything bad about Bush or the Republicans, if you can read these last two links and not be outraged, there is no way I’m going to convince you…
