Too early to go bullish on oil prices

Lets get the facts out of the way first, last night’s EIA inventory figures showed yet another build of crude oil stocks, this time by 5.3m barrels against consensus of 2.7m. This number is the highest since 1982 and the monthly figure is the highest since 1930. The interesting thing about these numbers was the refinery utilisation rate which fell 1.1%, this should not be happening at this time of the year and led to a fall in gasoline stocks of 2.1m barrels way above expectations. Indeed at this time of the year one expects refining to be running flat out and gasoline stocks building ahead of the driving season which is now only a month away. I think that this is a one-off and expect to see a reversal of the trend very soon, otherwise watch out for a sharp rise in gasoline prices. Finally, the EIA also said that US domestic crude production fell again last week, it was a miserly 18/- b/d to 9.37m b/d against the recent peak of 9.42m b/d but every little helps as they say.

From fact to not necessarily fiction but lets say opinion, the good thing about having not one but two major league oil conferences going on at the same time means that almost everyone with a vested interest has been on their hind legs in the last couple of days. Here is a brief selection of comments from the good and the great in no particular order from the CERA Annual shindig and the FT Commodities thrash in Lausanne.

Rex Tillerson, CEO of Exxon was more sanguine about oil prices saying that we might have to get used to lower oil prices and whilst not as bearish (he was bullish yesterday) Ian Taylor of Vitol said that there would likely be a dip in the 2nd quarter but that oil wouldnt go below the January lows of $46.

Others were more bullish, with Tony Hayward of Glencore and Genel Energy suggesting that oil prices would soon return to near $80 a barrel. His comment that ‘ action by companies to withdraw capital from the sector is sowing seeds for the next bull market’ I concur with but he may be going bullish a bit early. Elsewhere the CEO of Gunvor, Torjorn Tornqvist aid that ‘the low oil price is behind us’ whilst industry mouthpiece PIRA went further by saying that the price would ‘rise substantially’ in the coming months’. Add to that the legendary investment manager Mark Redway concluding that oil prices would rise in 2015 and industry professionals are at least on the face of it feeling a bit more upbeat at the moment.