This morning we saw a chart of world total oil inventories, perched about +10% above those of the last 3 years. Commodity traders know a +/- 2% change in inventories can push price by several standard deviations, so 10% is very excessive. And this comes at a time when oil global consumption is staggering due to the China virus. A plot of world oil use could likely be swapped for one of cotton. The overall general situation for raw commodities is that world capacity to produce just about everything is in excess, compared to what the world will use.
Shifting gears into the statistical morass of COT positions, we calculate that as of Thur close, some 12.3k of spec/mang futures longs are “off sides” to use the slang of the day. Another 9.2k long futures will be underwater if Dec closes below 6350. That price is right at the minor low of 9/09, and is the lowest since 8/20. That would be where we expect serious stops to be hit.
Both bulls and bears have to be frustrated, as price has meandered and gone nowhere for a month. A big week of sales, and pesky wet harvest weather, have supported the market. Looming harvest pressure, a near record world carryout, and concerns over world consumption keep a tight lid at historical resistance around 66c.
The Half Century
Chart below shows US production, use and end stocks for +50 years. Production has only slipped below 10 Mb twice, once due to gov inspired acreage restriction (PIK). For the last 35 years, production has mostly been between 12 Mb to 20 Mb, with 3 years reaching above 20. End stocks have been even more entrenched, between 3 Mb to 10 Mb. The lower figure is seen in multiple years, while the upper edges only 3x out of 50. What is unique of end stocks, is that repeats are rare. End stocks were same from 96/97 to 99/00, and this year.