We are in US summer driving season, but Tom Whipple observes that both oil and gasoline stocks are unusually low :
The US weekly stocks report came as a bit of a surprise by showing a decline in US crude inventories of 1.7 million barrels last week. This was the third weekly decline in a row and came as US refineries ran at the highest level in 10 months. The inventory news was undercut by a statement from the Federal Reserve saying that the US recovery was going “somewhat more slowly” than expected. Concerns about the US economy are among the factors keeping US crude trading some $20 a barrel below London crude.
US gasoline stocks also took an unexpected dip of 500,000 barrels last week. Analysts had been expecting an 800,000 barrel increase. The EIA also reported that US gasoline consumption averaged 9.3 million barrels over the last month, up by nearly 1 percent over last year despite gasoline prices averaging a dollar or so a gallon higher. This news sent NY gasoline futures up by 9 cents a gallon to close at $2.97 a gallon. The government report was reinforced by MasterCard who reported gasoline demand last week was 9.34 million b/d, the highest consumption since Memorial Day.
Looks like everyone noticed. The US has released some of its reserves 17 times, but for only the third time in 37 years, the International Energy Agency has authorized an emergency release of international strategic oil reserves. The first time was during the Gulf War, the second time was during the Katrina supply disruption and the third time is during ... the Libyan civil war?
Industrialized oil consumer nations on Thursday announced the release of 60 million barrels of oil from strategic government stockpiles in a bid to push down crude prices and underpin the global economy.
The 28-member International Energy Agency said it would release 2 million barrels a day (bpd) over an initial 30 days to fill the gap in supplies left by the disruption to Libya's output. The United States will provide half the volumes, about 1.5 days of U.S. consumption.
The Wall Street Journal adds:
"I expect this action will contribute to well-supplied markets and to ensuring a soft landing for the world economy," said IEA Executive Director Nobuo Tanaka in a statement.
The U.S. release represents a pivot for an administration that has long resisted calls to unleash its storage of oil despite persistently high gas prices. The move will likely send ripples through the stock market and cause a political backlash in Washington. The administration has said the reserves should only be tapped during emergencies, not solely because Americans are feeling pain at the pump.
"We are taking this action in response to the ongoing loss of crude oil due to supply disruptions in Libya and other countries and their impact on the global economic recovery," Energy Secretary Steven Chu said in a statement.
It seems to be getting harder and harder to maintain the appearance of normalcy.
Update - Destor thinks we're messing with OPEC, Rmrd0000 thinks we're messing with speculators, I've read the "Obama wants to keep prices low so he will be reelected" theory, and the "Obama wants to stop the speculation bubble" theory. At Forbes, this fellow said yesterday:
Saudis Set To Bankrupt Iran With Flood Of Oil
Today [Jun 22] the Wall Street Journal has a fascinating piece describing a speech given this month by Saudi Prince Turki Al-Faisal. The prince, speaking to a group of U.S. and British servicemen at an airbase near London, explained that Saudi Arabia was so concerned about Iran’s continued march toward attaining nuclear weapons that it was considering opening its oil spigots and swamping the world with oil in the interest of gutting Tehran’s government revenue.