Oil Pricing And Fundamentals Often Dislocate…Like Now by Todd Sullivan, ValuePlays
Below is the updated chart of the U.S. Energy Information Administration monthly data from 2010- which includes Friday’s report. Link:
Two weeks ago I sent the EIA data in chart form with the comment that psychological not logical thinking is roiling the security markets. Where in 2012 fears of “Peak Oil” resulted in a price spike over $140bbl during a period when PRODUCTION EXCEEDED CONSUMPION, today’s investment panic is based on several months of excess production. The only explanation why “Peak Oil” panic occurred in 2012 but not today has to be laid to market psychology. Market psychology is impossible to predict.
Friday’s data from EIA indicates that CONSUMPTION EXCEEDS PRODUCTION (92.4Mbpd vs 91.9mbpd).
Be patient!! Market psychology always has periods of excesses in any direction. This always reverses if not supported by economics. Our current panic that oil production is in excess with no change on the horizon is one of those periods. It will pass!