Crude oil prices over the past few months have show strong resilience to the ever building inventories. Week after week crude oil inventories have built to now a 19 year high reserve in the USA. The stock market seems to be speculating a relatively strong recovery and it seems like oil is attempting to price in the same by shrugging off the overall bearish reports.
Since the stock markets appear to be more speculative than realistic these days, crude oil supplies look to be a better indicator to economic activity in the United States. As the old saying goes “America runs on oil”, so it stands to say that if oil demand is retrenching than probably US production is doing the same.
Here is a chart of crude inventory supplies in the USA:
Crude oil supplies have continued to build at a relatively quick pace since October 2008. You will also notice that crude oil supplies broke above the June 2007 highs in February 2009 after a brief stabilization of the inventories in January till mid February.
The stock market started its most dramatic decent in October 2008. The stock market over the past month and a half has been rallying off data showing stabilization in the economy from January and February.
Every week a report is released by the Energy Information Administration tracking crude inventory supplies in the United States. Because oil is measured by barrel, coming up with this report is not open to interpretation or future adjustments.
If you believe America truly does run on oil, then this should be a good leading indicator to how fast America really is running.
