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Conclusion: Total oil and petroleum stocks are at all time highs in the United States, suggesting underlying demand is slow, which supports our view of decelerating GDP growth.

We can get verbose at times, but sometimes it's simply easier to just show one chart.  The chart below is comprised of distillates, crude oil, and gasoline stocks from Department of Energy data going back to 1990, which is as long as the data is kept.  Currently the aggregate supply on hand of petroleum products is 1.1 billion barrels, which is the highest level we've ever seen in this data set.

According to the BP 2009 Global Energy Abstract, the United States consumed 18.7 million barrels per day in 2009, which was 22.3% of the total world production. Its share of world imports is slightly smaller at 11.4 million barrels per day, or 21.6% of the total.  The point is, the United States consumes and imports more than 20% of the world's oil, so if inventories are at an all time high level in the United States, it is a negative data point for future prices.

Distillate stocks are the real outlier in U.S. petroleum stocks as they are well above the 20-year band of 100 and 150 million barrels of inventory for really the first time ever.  Distillate inventories are currently at 175 million barrels, which suggests anemic demand for distillates.

The last time inventories were close to this high was October 1991.  Despite inventory declining over the next two years, the price of oil fell more than 22% over that time period.

We'll have more thoughts on this topic from Energy Sector Head Lou Gagliardi next Thursday as he launches his energy sector coverage, but to the extent you are long oil . . . keep the chart below front and center.

Daryl G. Jones

Managing Director

Long Oil? Keep This Chart Front and Center - 2