Posted by WARREN MOSLER on 5th August 2009
With any kind of meaningful recovery the saudis will be able to increase price substantially without fear of demand falling off.
Right now they are just setting the hook.
Letting the world economies stabilize and financial markets recover before making their next move, while no conservation efforts of consequence are being put in place by the consumers.
DOEs: Industrial Demand Rises Above 2008!
We have been discussing the industrial demand for oil products as a leading indicator to identify signs for a recovery in Industrial Production. However, we were not as optimistic to think that demand would surge to surpass the prior years’ level of demand in the near-term. We were looking for signs of stabilization. So, this week, we highlight this point that reinforces our belief that U.S. oil demand appears to have bottomed and you should start to see more coincidental indicators of industrial demand.
Broadly speaking, Total Product demand in the U.S. continues to rebound and has risen to 19.287 Mbpd from the trough of 17.697 Mbpd at the end of May ’09. Inventory levels continue to be an overhang and much attention is being paid to stocks at Cushing that remain lofty. However, we are demand focused and see continued and substantial improvement. In addition, year-over-year comparisons will be favorable into the later part of 3Q09.
For Industrial demand for oil products, we use residual, asphalt, propane, propylene, waxes, still gas, etc. We believe that these are “leading” and should be closely watched as the industry goes thru a period of restocking. The next data points we believe investors should see in coming months are increases in power generation and also increases in distillate demand. Both of which are “coincidental” indicators of demand in our opinion.