RE:Oil production down, demand is up & inventory errorsThanks BuyCanadian. It's true that the market players perception of the level of supply/demand dynamics are the driving factor affecting oil prices. What I don't understand is why you think that weekly inventory changes published by the EIA are not relevent to the supply/demand equation?
If in a given week more supply is available then is utilized by refiners etc. then that excess supply has to go somewhere ie. storage. So that particular week the supply was greater then the demand which causes the price to drop. Sure what was delivered the following week might have been extracted weeks ago or on a storage ship at sea and just happened to be delivered to the utilization facilities so the inventory changes are backwards looking but that downward correction can equally be reversed if there are signs that supply might meaningfully drop or demand increase ie forward looking. These forward unrealized anticipated events have an influence on the realtime price the same as the backward looking events like inventory changes do. The market also considers the US production figures (forward/future supply) which have clearly been dropping since late last fall. If that decline continues the results will show up in weekly inventory changes down the road.
The counter arguement to your objection to focus on weekly inventory changes is why should the market react now to news that might affect supply alot further down the road? For example why did the price of oil drop 10% the next day a deal was reached with Iran almost a year ago? At the time there was no certainity that they would comply with the restrictions and questions if Iran would be capable of bringing on much supply given their state of disrepair. Yet that event catalysed a bear run of over 1 month oil dropped from $63 to $38. What about Canadian wildfires or Nigeria disruptions? The market rallied even though it was unknown if or how much those events might have on supply sometime in the future.
If the market has it wrong right now then why? What supply/demand data or forecasting decline models do you have that the market does not?
Your estimate comment reminds me of some people who writes about "missing barrel"s and how the EIA estimates were wrong in the past. Here's an article from way back in 1998 questioning the EIA:
https://www.oxfordenergy.org/publications/the-strange-case-of-the-missing-barrels/
Here's one from a few weeks ago:
https://www.wsj.com/articles/crude-mystery-where-did-800-000-barrels-of-oil-go-1458207004
BUT at the end of the day If the market ignores these missing barrels observations or theories then who cares if they are right or wrong? The market has ignored the EIA critics since 1998 why should that change now?
As for the charts oil 2016 looks almost identical to last year. You remember what happened to oil starting last June? It dropped just like it is now. Do you want me to post this? You can pick and choose the periods of bullish price action or bearish action. I'll focus on the near term trend.
Your posts seem to imply you have some inside information regarding supply/demand the market does not. Is this accurate?