US oil stocks Dec11.pngThe blog suspects that the above chart may not feature prominently in the New Year reports about to be published by the main oil market brokers.

These will instead probably highlight the view that oil markets are very tight, and that prices should surely go higher. They have held this view for several years, and made good profits from selling high-priced futures to their pension fund and other clients, as we noted in chapter 3 of our ‘Boom, Gloom and the New Normal’ ebook.

The chart gives the history of US oil demand and inventories on a monthly basis since official US Energy Information Administration records began in 1963. It shows

• Total inventories in terms of combined ‘days of demand’ for crude oil and products (red line, left hand scale)
• Total supply of crude oil & products (kbd, green line, right hand scale)

February 2003’s inventory at 42 days of demand was the lowest-ever level. February 1973 saw 45 days of demand momentarily. Inventory was also at 45 days in December 1999, and between December 2003-April 2004, and at 47 days in December 2007.

But since the Great Recession began in Q4 2008, it has not been below 54 days. Last September, the latest month available, it was at 58 days. This was very close to the average of 62 days for the whole 1963-2011 period.

The reason is that US oil demand actually peaked back at 21.7mbd in August 2005. Since the downturn began, it has never been above 19.7mbd. In September, it was 13% below the peak at just 18.8mbd

But, of course, a story that focused on lower demand, and comfortable inventory levels, would probably not produce too many positive headlines for prices.