4 Charts that have everything and nothing to do with Crude Oil Speculation

It’s not hard to surf around on the internet and find stories of the United States fading from its supremacy over the rest of the world in education, average income, and happiness… but there’s one title we’ve seemed hell-bent on reclaiming. And now we’ve got it!  Last month the United States overcame Saudi Arabia as the world’s biggest producer of oil because of a jump in shale output, according to Reuters.

“U.S. output, which includes natural gas liquids and biofuels, has swelled 3.2 million barrels per day (bpd) since 2009, the fastest expansion in production over a four-year period since a surge in Saudi Arabia’s output from 1970-1974, PIRA said in a release on Tuesday.

It was the latest milestone for the U.S. oil sector caused by the shale revolution, which has upended global oil trade. While still the largest consumer of fuel, the rise of cheap crude available to domestic refiners has turned the United States into a significant exporter of gasoline and distillate fuels.”

Is this the reason for the fall in gas prices? Does this mean we’re going to continue to see gas below $3.00/a gallon nationwide? Does this mean crude prices won’t be affected as much because of unrest in the Middle East? No, no, and no. This wasn’t an overnight development. To the contrary, it has been many years in the making as US producers figured out where and how to get at the Shale Oil.

But it’s hard to ignore the sell off in Crude Oil and Gasoline prices this fall. Since its highs in September, Crude is down 15% and Gas prices are at their lowest level since February of 2011.

Short Term Crude Oil
Chart Courtesy: Finviz.com
(Disclaimer: Past performance is not necessarily indicative of future results)

AAA Gas PricesChart Courtesy: AAA

It’s quite interesting to see how similar the moves in gas prices are year after year (something not lost of gasoline trader Protec Energy, to be sure – whose model is based in part on participating in the ‘spring build’ in gasoline supplies for the summer). A lot of that has to do with weather, the fact the kids are out of school in the summer, and so forth. But the smaller moves in Gasoline this year may be part of a bigger shift away from driving.

Barry Rithotlz of the Big Picture  suggests that the fall in gas prices is due to the fact that fewer people are in fact driving to work regardless of weather, (when adjusted per capita).

“There are a few factors driving this: Total miles driven has not recovered from its November 2007 highs. It is off almost 3 percent from its highs of more than 5 trillion vehicle miles driven annually. Persistently elevated unemployment of 7.3 percent means there are that many fewer people driving to work. And the pre-collapse shift to the exurbs — and their much longer commutes — suggests the trend toward ever-longer commutes may have topped out.

To put gasoline prices into the starkest relief, consider adjusting total U.S. miles traveled on a per capita basis. The chart above, via Doug Short, reveals that per capita miles driven peaked in June 2005. They have since fallen almost 9 percent. The last time we saw average annual mileage at these levels was back in 1995.”

Miles Driven on All RoadsChart Courtesy: Barry Ritholtz

Whatever’s going on – the managed futures world would prefer to get a different look to the energy markets – which have been mostly range bound since 2011, moving between $80 and $115. So whether it’s a deal with Iran and massive amounts of truck fleets switching to natural gas-powered vehicles driving Crude prices down into the $60’s, or unrest in the Middle East, economic improvement around the world, and a return to driving in the US pushing prices into the $140s – we don’t care. Just move already.

Crude Oil Long

Chart Courtesy: Finviz.com
(Disclaimer: past performance is not necessarily indicative of future results)

Write a Comment

The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.