The crude markets stayed relatively flat for the last week, as the real battle continued to be waged between the major movers of oil prices. The fundamentals of supply and demand continue to work in favor of a crude spike higher while the financial battles of those who think oil is going up and those betting, or at least guarding against, oil prices dropping again precipitously is biasing prices to the downside.
Between the two, there is a disconnect between U.S. oil production – definitely on the upswing among shale players and global production, being cut by both OPEC and non-OPEC members like Russia, in line with their agreed production quotas. Instead of picking a winner in these struggles again, I'm going to point out one place where there will be consistent problems, and worth avoiding: U.S. refiners.
In the U.S., the higher than $50 price for oil has encouraged E+P’s to take advantage of 'low hanging fruit' wells that have become profitable above $50. The number of rigs is increasing weekly, even if the total number is still more than 1000 down from the highs in 2014. And there’s a lot of bluster about the increasing stockpiles here in the U.S. that are pulling out the production drops from OPEC, again animating the argument of oil's next move. But let's not miss an even easier conclusion:
Looking domestically, there’s an enormous gasoline glut that is just choking the pipes and putting a cork in crude oil throughput. This is…