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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Re: Crude oil inventories update

Posted by WARREN MOSLER on January 26th, 2009


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(email exchange)

Thanks, should be more than enough given the small drop in actual demand.

>   
>   On Mon, Jan 26, 2009 at 9:59 AM, David wrote:
>   
>   Tanker tracking suggests an OPEC11 production of 26.1 mbpd in January,
>   compared to the target of 24.85 mbpd, with Saudi Arabia, Venezuela and
>   Nigeria leading the cutbacks. However, this represents a cut of only
>   2.9 mbpd from the agreed cut of 4.2 mbpd (a compliance of 69%), which is
>   somewhat under the estimated 3.5 mbpd cut needed to balance the market in
>   the near term. But it should easily balance the tightening market further out,
>   especially if compliance improves.
>   

The contango in the futures market continues to come in, as does the spread between WTI and Brent.

The RBOB contango also coming in, indicating gasoline supplies are also tightening.

This indicates spot supplies are tightening- the OPEC cuts are ‘working’.

Most consumption indicators show crude consumption to be about flat or only down slightly year over year.

The great Mike Masters inventory liquidation that began in July may finally have run its course.

And the Saudis are back to being price setter.

I would strongly recommend any fiscal adjustment that increases aggregate demand be accompanied by policy that immediately and substantially reduces crude oil and gasoline consumption.


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3 Responses to “Re: Crude oil inventories update”

  1. Mike Norman Says:

    Narrower contango only indicates more people are betting that supplies will tighten. So far no indication in actual inventories, which are 10% higher than a month ago and 15% higher than a year ago, at least domestically.

    Reply

  2. RichW Says:

    Warren,

    Given exports are a cost and imports a benefit why the need to cut oil consumption?

    Why differentiate between the importing of oil and other goods on a cost/benefit basis?

    Reply

  3. warren mosler Says:

    because a foreign monopolist, the saudis, will demand ever higher real terms of trade- force us to export more to get the same quantity of imports

    Reply

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