USO, not buying the bear marketOver the past month especially, crude has fallen into a bear market. Most of this bearish reasoning is coming from the U.S. EIA reports which is showing a large amount of undocumented crude which has resulted in a very swollen crude storage inventory, mostly all in PADD 3 (Gulf Coast.) There is strong reasoning to believe that this undocumented crude is actually plant condensate, which is not exactly an equivalent of crude oil yet being counted as such by weekly data.
If we deduct this probable phony glut of non-crude oil which is more likely some type of condensate, would we still be in a bear market? Possibly, a little bit at least, but that would have much to do with lower refinery run rates and Trump's trade wars.
Venezuelan imports to U.S. are down to zero. Canadian imports can only ramp up nominally by railroad. Saudi Arabia exports to U.S. have been extremely low, in the 400,000 barrels per day region and there isn't much alternative to recovering those lost barrels from elsewhere as heavier barrels have become a scarcity.
It is very possible that at the end of the month, EIA 914 monthly data corrects U.S. weekly data production numbers with a downward revision.
Texas' Permian basin rig count has fallen significantly, while the North American rig count overall is down big time; completions in the Permian have also not taken off, they have grown, which tells us that it seems unlikely the U.S. could have shot up to over 13,000,000 barrels per day in production. It is more likely in my opinion that we see a decline or flatlining in U.S. production as it appears many U.S. producers are focused on (attempting at least) to generate free cash flow to appease everly demanding shareholders.
I think the overall market will be taken by surprise when it comes to realize that condensate has been getting counted as crude and that U.S. production isn't going to be growing as many analysts forecasts; all this is happening at the same time, historically reliable suppliers like Venezuela completely fall into an abyss and OPEC appears as disciplined as ever, while Canadian pipelines are delayed which reduces egress potential to the market in the coming couple years.
