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The hightest weekly addition to Inventories in Cushing on record .

December 10,2016- Cushing Inventories

Looking at the data of week48(stock ending December 2,2016) relased wednesday by EIA show little change except astonshing highest weekly addition to inventories in cushing . The Stock at Cushing increased from 61502 MMB to 65285 MMB , which is 3783 million barrels , the largest increase ever in one week .

this easily ,can be explained ( see below) ;but what is astonishing is an increase in the daily AFRA ( Frieght Rate ) of VLCC Tankers heading towards Japan from the gulf which means an strength in the tanker market( very unusual during the winter) confirming that the improvement is due crude storage . This would add to the problem during January 2017

The astonshing rate of adding to stock in Cushing the day before the OPEC meeting suggests that the traders went bullish before the 30th November, who wouldn’t ? with crude oil prices around $45 On Nymex for WTI the day before the OPEC meeting on November 30th and their Ministers Blackmailed with only two options “ Agree to the production cut and go home with $52 price , or walk out without agreeing but take home a prices below $40 per barrel”

which is riskless trading day on the futures . See the below Curve for WTI the day after and the stock level at Cushing. above

Most traders expected that OPEC would reach an agreement and Price would Increase … this explains why , contrary to the expectations, the traders added more to an already high Inventories

However, Theoretically, there should have been a drop in stock in Cushing because The traders were trapped with a high level of 61.2 Million barrels ,of crude with average cost of $45 and should have been destocked immediately , but apparently they are holding their breath for December 10th OPEC and Non-Opec .They are expecting another round of price increases to reach above $53 . Again similar to 2014,2015,2016, the market is back to Contango, and 2017 January should be similar to 2016 but this time the bottom price is $43 and not $25

To Sum up : it looks that till end of January , the market will be unbalance again , due to the high level of stocks that will be trapped and the competition aamong OPEC memebers to maitain Market share again

Extra ordinary situation. any attempt to balance the situation is ‘self-contradictory’: