• 312 days Will The ECB Continue To Hike Rates?
  • 313 days Forbes: Aramco Remains Largest Company In The Middle East
  • 314 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 714 days Could Crypto Overtake Traditional Investment?
  • 719 days Americans Still Quitting Jobs At Record Pace
  • 721 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 724 days Is The Dollar Too Strong?
  • 724 days Big Tech Disappoints Investors on Earnings Calls
  • 725 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 727 days China Is Quietly Trying To Distance Itself From Russia
  • 727 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 731 days Crypto Investors Won Big In 2021
  • 731 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 732 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 734 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 735 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 738 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 739 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 739 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 741 days Are NFTs About To Take Over Gaming?
  1. Home
  2. Markets
  3. Other

The Fudge Factory

Today, October 12, 2006, China reported that crude oil imports jumped 24 percent over the same month a year earlier.

China's Oil Imports Surge to Record High
Thursday October 12, 7:23 am ET
By Elaine Kurtenbach, AP Business Writer

China's Oil Imports Surge to Record High As Country Begins Filling Strategic Reserves

SHANGHAI, China (AP) -- China's oil imports surged to a record high 3.3 million barrels a day in September, the government reported Thursday, as the country recently began filling its newly built strategic oil reserves.

Preliminary data from the General Administration of Customs showed crude oil imports jumped 24 percent over the same month a year earlier to 13.5 million metric tons (15 million U.S. tons) in September.

Doing The Math....

Does anyone note the complete and utter disconnect as to how China can be importing 24% more crude - year over year - in the face of declining output from the world's super giant oil fields [Cantarell - Mexico, Burgan - Kuwait, Ghawar - Saudi Arabia, Prudhoe Bay - Alaska, North Sea etc.]? Never mind the fact that the U.S. Gulf Coast never did recover from lost production of both nat. gas and crude in the wake of Katrina - much of which has NEVER been replaced.

Geepers, if we are to believe government reports, there is so much oil sloshing around in the world - that, Ripley's Believe It or Not - the Strategic Petroleum Reserve was even able to "top up" to the tune of an additional 800,000 barrels thus far in October?

Despite all of this anecdotal evidence, the government's EIA says that oil demand for 2006 is less than 2005 [I can only assume to justify plunging energy prices] due to an unusually warm winter,

"For the first 6 months of 2006, average demand was down 130,000 bbl/d, or 0.6 percent, from the previous year due to mild weather -- which reduced heating oil, residual fuel oil, and propane consumption -- and rapidly rising prices, which greatly affected motor gasoline and jet fuel demand growth."

It would seem to me that IF the U.S. economy was demanding any meaningful amount LESS energy, for reasons other than climate, on a year over year comparison - this would CATEGOROCALLY imply recession - absent an offsetting productivity increase - wouldn't it? Has government economic data reported any sign of a recession?

But On Second Look....

According to Wikipedia,

"distillate usually refers to fuel oils produced through distillation, such as diesel and heating oil. This distinguishes them from the residual fuel oils, which are made from the residue left after distillation."

Now, when we review the EIA's graph below, we can clearly see that DISTILLATE growth [at Oct. 12, 2006] is POSITIVE! What I'd really like to know is what OTHER is - because that is what is making their annual demand projections appear "negative"?

With the above graph CLEARLY demonstrating POSITIVE GROWTH in the consumption of distillates in the U.S. - how could any price decline be attributed to lessening of demand in the same?

The Fudge Factor or, Is Somebody Fibbing?


So, let's try to make some sense of all this....

The explosive growth of derivatives goes far to explain how / why prices are declining. 5.5 TRILLION GROWTH in a derivatives book at one bank [J.P. Morgan Chase] in one quarter should be sounding ALARM BELLS all over the world as to what is really going on.

Does anyone beside me make a connection between the "insanely explosive growth" of J.P. Morgan's derivatives book and plunging energy prices in the face of seemingly structural supply / demand imbalances?

Risk magazine, January 2006

J.P. Morgan was named Risk magazine's Energy derivatives house of the year in their January issue. According to Risk, "J.P. Morgan has emerged as a key player in energy derivatives over the past year." Since 2004, under the guidance of Beau Taylor, global co-head of Energy, the firm has built a leading energy trading practice. Focus has extended from natural gas and crude exotic derivatives to include electricity, coal and emissions trading.

Has it occurred to anyone that physical inventory in the Strategic Petroleum Reserve [SPR] is about as easily counted and measured as the GOLD in Ft. Knox or West Point?


Back to homepage

Leave a comment

Leave a comment