It’s Pina Coladas time: A Sunny Outlook for Oil Prices and the Economy
If you like piña coladas
And gettin’ caught in the rain
If you’re not into yoga
If you have half a brain
Indeed, it is pina colada time for the contango loving crude terminal operators and wholesale product marketers. Backwardation has once again secured the Infinity Stones and snapped contango back to dust. The Wall Street energy traders, who had been shorting the WTI market for the last few months and holding back the backwardation have packed it in, tucked tail and are headed to the Hamptons. Rumor has it they were last seen at the Boardy Barn telling everyone how much they liked it. The hedge funds are now going LONG on gasoline and diesel futures. With the inflation numbers easing, demand improving and recession fears abating, it’s difficult to make a bearish case for oil prices. Binding together OPEC’s production cuts and unyielding demand growth should literally increase the gap between supply and demand. Oil prices have increased by $10/barrel over the scorching hot month of July. The bean counters have pegged global demand at 102 million barrels per day, with supply at only 100 million barrels per day. It doesn’t take half a brain to know which way this will take things. Surprisingly, the US rig count continues to dwindle, down another 5 this week and a decrease of 100 active drilling rigs this year. The Permian rig activity has shown a steady decline over the last quarter. While US production is up by about 100,000 barrels per day this year to 12.2 million barrels per day, that’s not enough to make up for the OPEC+ supply cuts. The cavalry will have to come from elsewhere. However….not all oil prices are climbing. The international prices of major edible oils such as soybean oil, sunflower oil, crude palm oil and refined palm oils have decreased by around 25% this year. The Tank Tiger has been scouring the Western Hemisphere for tanks to store these commodities and we have worked with some terminals to make these tanks available to suit this demand. So if you’re looking for tanks for edible oils, let us know. But remember, olive oil and pepper goes great on home grown Jersey tomatoes.
The stock market has been guzzling down this positive economic news like Red Bull. US consumer sentiment continues to surge upward and consumer spending in June increased accordingly. U.S. GDP growth in Q2 was stronger than expected (2.4% vs prediction of 1.5%), while durable goods orders showed the fourth straight month of growth. With the CPI now down to about 3%, the Fed may now be looking for a parking spot for their interest rate Corvette. 75% of the companies in the S&P 500 have outperformed their earnings expectations. So far no weakness in employment. Yes……$$$MR. MARKET$$$ is HUGE. Bring him your finest meats and cheeses.
We hope everyone is having an enjoyable summer. The Tank Tiger has been splitting time between the beach and the office, but we know you can always find us. We ALWAYS return your phone calls, emails and instant messages. It’s our company policy. As much as we do like pina coladas, we’re also happy to report that July 2023 was our best month ever in our 8 year existence. Despite the lack of sustainable contango, our activity level YTD for both storage inquiries and arranged opportunities are up 12% vs. the same 7 month period in 2022. Please know that we are exceedingly grateful for your business and, no, we’re not into yoga.
