1/THREAD: $CL_F FALSE INVENTORY SIGNAL #OOTT
Several weeks ago I predicted that we would soon see much smaller Cushing builds or even a Cushing or product draw. I went on to explain the market would misinterpret that signal. I think it's happening now.
Explanation follows...
Several weeks ago I predicted that we would soon see much smaller Cushing builds or even a Cushing or product draw. I went on to explain the market would misinterpret that signal. I think it's happening now.
Explanation follows...
2/ Everyone one has been focused on the question of "When will Cushing fill up to the brim?"
The answer is never. It is ALREADY as full as it can get. They need to reserve a few empty tanks for blending operations and for other operational reasons. So reaching working CAPACITY
The answer is never. It is ALREADY as full as it can get. They need to reserve a few empty tanks for blending operations and for other operational reasons. So reaching working CAPACITY
3/ won't happen.
Think about what happens when something is FULL. No more can be added. So the size of additions falls to zero.
The smaller Cushing build and Gasoline draw reported by API are a very important signal that Cushing is ALREADY AS FULL AS IT CAN GET. No more can be
Think about what happens when something is FULL. No more can be added. So the size of additions falls to zero.
The smaller Cushing build and Gasoline draw reported by API are a very important signal that Cushing is ALREADY AS FULL AS IT CAN GET. No more can be
4/ added because there is NO SPARE CAPACITY AVAILABLE FOR LEASE.
But the market won't interpret it that way. They will see the rate of additions going down and conclude "Great news! Cushing isn't filling up after all. The predictions were wrong!".
That makes no logical sense.
But the market won't interpret it that way. They will see the rate of additions going down and conclude "Great news! Cushing isn't filling up after all. The predictions were wrong!".
That makes no logical sense.
5/ It's like saying a glass of water will never reach full because the rate of addition has fallen to almost zero. In reality the REASON the rate of addition fell to almost zero is that the glass was already full!
But the PUBLISHED working capacity is still quite a bit higher
But the PUBLISHED working capacity is still quite a bit higher
6/ than current levels, so market participants used to thinking Big Build = Bearish, small or no build = bullish will misinterpret the signal.
@Big_Orrin and others have also pointed out that plenty of big players have a LOT to lose if Cushing were ever REPORTED to have reached
@Big_Orrin and others have also pointed out that plenty of big players have a LOT to lose if Cushing were ever REPORTED to have reached
@Big_Orrin 7/ full working capacity. They can easily set some space aside to make sure that REPORT never happens. Their cost to lease storage and leave it empty is much lower than their cost if prices crash on a report of Cushing reaching tanktops.
@Big_Orrin 8/ EIA data comes out in just over 90 minutes. If it confirms API's report of a smaller Cushing build or even a Cushing draw, expect fireworks in the market as most participants incorrectly conclude that it means Cushing isn't running out of space as quickly as feared.
ENDTHREAD
ENDTHREAD
@Big_Orrin /CLM0 popped a full dollar higher in the first 2 min after the 9am open, squeezing M/N to barely over $4.
Who believes all those contracts were just bought by buyers intending and capable of taking physical delivery?
Who believes all those contracts were just bought by buyers intending and capable of taking physical delivery?
