FLASH::: THE FUTURES MARKETS ARE COMPLETELY MISREADING US INVENTORIES!

NYTIMES:

HOUSTON — A sharp increase in oil prices on Wednesday sent shudders through anxious financial markets already worried about the prospect of a global economic slowdown.

Crude oil climbed above $144 a barrel before settling at $143.57, up $2.60 for the day. The Energy Department reported an unexpected decline in inventories, sending oil prices to a record. And now oil slowly is closing in on $150 a barrel, the next psychological milestone to be crossed.

[...]

The crude oil inventory figure was 54 million barrels below a year ago, and nearly 22 million barrels below the five-year average, according to tabulations by Barclays Capital.

There was also some modestly good news in the report. Gasoline inventories rose 2.1 million barrels to 210.9 million barrels, an indication that gasoline demand is slackening a bit as drivers car-pool, buy more efficient cars, and use more mass transit when it is available.

LISTEN UP:

The decline in distillates PROVES actual demand by USERS of oil products is being SEVERELY hampered by the high price. EVERYONE IS USING LESS GASOLINE.

The decline in CRUDE OIL INVENTORIES IS NOT COUNTER-PROOF OF CONTINUED DEMAND OR LACK OF SUPPLY. (Though the increase in the price of a barrel in the futures markets would indicate that this is how the speculators are interpreting these data.)

REDUCTIONS IN US CRUDE INVENTORIES IS A RESULT OF THE FACT THAT ACTUAL PURCHASERS OF CRUDE ARE SLOWING DOWN THEIR PURCHASES BECAUSE THEY EXPECT THE DEMAND TO CONTINUE TO DECLINE - AND THEY EXPECT THE PRICE OF OIL TO DECLINE, TOO.

The fact that both distillate and crude inventories have declined is proof that the speculative futures market is causing the price increase and not natural, ACTUAL demand.

IOW:

There is ample supply of REAL OIL to REAL USERS OF OIL. AND THE REAL USERS DON'T WANT TO TAKE MORE DELIVERY,

THEY ARE SELLING LESS, AND WANT TO BUY LESS AS A RESULT. Their lower inventories are in line with their expectations for sales (lower) and their expectation that prices will decline going forward.

MEANWHILE THE OIL PRODUCERS CAN PRODUCE MORE - AND ARE!

THERE IS NO SHORTAGE OF OIL.

BUT THERE IS A SHORTAGE IN A RELATED AREA:

THERE IS NOT AMPLE SUPPLY OF FUTURES FOR THE SPECULATIVE MARKET.

The amount of dollars available for speculative "hedge" purchases of oil is VAST compared to the amount of dollars available to actually buy and use the oil.

This HUGE POOL of speculative hedge money is causing the oil price inflation.

There's too much HEDGE money chasing too little oil, not too much oil user money chasing too little oil.

This is why only users of oil should be permitted to buy futures of oil.

Or why margins have to be sharply increased.

UPDATE: THURSDAY IN ASIA: REUTERS:

Oil hit fresh records on Thursday for the fifth time in six sessions, as the dollar fell on gloomy U.S. jobs data and a broad equity sell-off, and a higher than expected fall in U.S. crude stocks raised supply concerns.

U.S. crude rose as much as 87 cents to $144.44 a barrel, before easing back to $144.25 by 0155 GMT. The contract touched a previous peak of $144.32 on Wednesday.

I'VE ALREADY PROVEN WHY THE INTERPRETATION OF US INVENTORIES IS FAULTY.

I'M NOW GONNA DESTROY ANOTHER MYTH: THAT "THE WEAKENING DOLLAR IS CAUSING THE INCREASE IN PRICE OF OIL":

• THE DOLLAR IS BASICALLY FLAT AGAINST THE EURO SINCE MARCH 1ST.
• BUT THE PRICE OF A BARREL OF CRUDE IS UP NEARLY 50%.
• THEREFORE, THE VALUE OF THE DOLLAR IS NOT A CAUSE.
• THE CAUSE IS SIMPLE: TOO MANY DOLLARS CHASING TOO LITTLE OIL. THIS CAUSES OIL PRICE INFLATION.
• THE HUGE INCREASE IN THE NUMBER OF DOLLARS CHASING THE FINITE AMOUNT OF CRUDE IS DRIVING THE PRICE UP.
• THE INCREASE IN DOLLARS CHASING CRUDE IS NOT FROM OIL USERS BUT OIL SPECULATORS.

IF WE GET THE SPECULATORS OUT OF THE CRUDE OIL MARKET THEN OIL WILL DROP TO $80.