Jobs losses are mounting and oil supplies are rising. It is time to face facts. Recent economic data is undermining the bull's oil case. Welcome to the jobless economic recovery that should reduce oil demand expectations even further as we look out into our future. Oil prices slid as our nation's unemployment reached a painful 9.8% and we lost 263,000 jobs. The oil bulls had better hope the dollar collapses if they are going to have any luck defending these lofty price levels.
US supplies are staggering but even more so when you consider the weakened state of the jobs market. With the US being a consumer based economy, it does not bode well for a quick return to robust growth. Numbers from the Energy Information Agency gives us a picture of just how oversupplied this market is. Consider for example that crude supply is 10.3% above the five year average. Gasoline supply 5.5% above the five year average and distillate supply a whopping 28.7% above the five year average. Oil in floating storage is pegged at 50-55 million barrels.
OECD supply according to Iran's oil minister is at record high of 60 days of forward demand cover. Now ask yourself where is the demand for oil going to come from?
Another bearish factor came into play as some Nigerian rebels have taken amnesty and have laid down their arms. Though Nigeria will still be a dangerous place, this does reduce the risk of rebel related attacks. The Financial Times says that fears still remain. The FT says that, "Three militant commanders responsible for many of the attacks that have curtailed Nigeria's oil production agreed on Sunday to lay down their weapons after accepting the government's offer of amnesty at the 11th hour. The gunmen's emergence from their bases in the mangrove swamps of the Niger delta as Sunday's deadline for a 60-day amnesty neared marks a victory for the efforts of Umaru Yar'Adua, president, to bring stability to the oil-rich region." The FT goes on to say, "Yet even as the rebel leaders who command thousands of foot soldiers said they would surrender their arms in exchange for an unconditional pardon, there were warnings that violence could return."
"There are still thousands of people willing to continue fighting in the creeks and only the actions of the government can win over our brothers still bent on fighting," Farah Dagogo, one of the commanders, said in a statement. Along with Government Ekpemupolo, known as Tompolo, and Ateke Tom, Mr. Dagogo operated under an umbrella group called the Movement for the Emancipation of the Niger Delta. Some in Mend have rejected the amnesty, saying it does not address the delta's grievances. Mend, which orchestrated a raid on Royal Dutch Shells' deepwater Bonga field last year, told the Financial Times: "New deadly commanders are going to take over that are not known to the government." However, with its top commanders now retired, Mend's capacity to strike is unclear. A ceasefire it declared before the amnesty has 11 days to run."
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