America Is Swimming in Oil -- 4 Charts

Just sit right back, and let me tell you a tale about a man named Uncle Sam. You see, Uncle Sam is swimming in oil.

Now that you're ready to rip your own eyes out, let me tell you that I have a lot of charts and data below. And the last chart is a doozy.

Bloomberg tells us ...

Shale Boom Sends U.S. Crude Supply to Highest Since 1930s

The U.S. is stockpiling the most crude since the Great Depression, thanks to the shale boom that has boosted production to the most in 26 years.
Inventories rose 3.52 million barrels last week to 397.7 million, the highest level since 1931, according to Energy Information Administration data.

So why are oil prices so high? One analyst says that they could be higher, if not for weak demand.

“Although the market may think U.S. commercial crude is bursting at the seams, it is not — and at 397.7 million barrels, we are only 2.3% higher than one year ago,” said Richard Hastings, macro strategist at Global Hunter Securities. “The problem is on the demand side, which is quite weak.”

In other words, we're producing a lot more oil. But it's not cheap oil.

Sean's note. It seems that refiners are processing plenty of it. In fact, refinery utilization was at 91% for the latest week, up from, 88.8% a week earlier and up from 83.5% the same time a year ago, EIA data showed.

So why then did this happen ...

Gasoline Trades Near Eight-Month High as Supplies Drop

Gasoline inventories decreased by 0.3 million barrels to 210.0 million barrels. At 210.0 million barrels, inventories are down 7.8 million barrels, or 3.6% lower than one year ago.

So what's the problem?  The EIA says seasonal issues have a lot to do with it.

Typical seasonal factors contribute to recent rise in gasoline price

The EIA says: "Changes in the price of retail gasoline result from changes in both the price of crude oil and wholesale gasoline crack spreads. Crude oil prices do not display a seasonal pattern. Crack spreads for gasoline, however, are very seasonal. This post-February increase is largely related to typical seasonal factors such as refinery maintenance, increasing demand from driving, and the switch to summer-grade gasoline, which is more costly to produce than winter-grade gasoline."

Yeah, nice try.  But the real reason is that refiners are selling more and more product overseas. We can pump enough oil to drown Godzilla, but it won't matter if that oil is refined and exported.

You see, the EIA also says:
US petroleum product exports increased in 2013

US petroleum product exports in 2013 averaged 3.5 million b/d, up 10% from levels in 2012, according to the US Energy Information Administration. In December 2013, US exports of petroleum products reached 4.3 million b/d, the first time to exceed 4 million b/d in a single month.
Exports of distillate fuels in 2013 increased 110,000 b/d over the previous year to 1.1 million b/d, according to EIA data. This was accompanied by a 160,000 b/d increase in distillate fuel production in 2013 as the result of cost-advantaged US crude oil and natural gas and near-record-high refinery runs.

Here's a chart I made of US oil exports using EIA data. It goes through January (the latest month available).

Wait there are two more things you need to know.

First, the oil boom in Texas is big and getting bigger. In fact ...

Texas expected to outproduce all but one of the OPEC nations this year

Benefiting from the booming Eagle Ford Shale and Permian Basin, Texas likely will best the oil output of every OPEC country but Saudi Arabia by year-end, says a top exploration official at ConocoPhillips, a key acreage holder in both of those oil-and-gas formations.

The Lone Star State is expected to end 2014 with 3.4 million barrels per day in oil output, which exceeds that of 11 of the dozen OPEC nations.

Second, all that oil has to travel around the country somehow, right?

With Keystone delayed, oil by rail in DC spotlight

The story says ...

Delivery of oil by train has rocketed as the Keystone XL pipeline has been delayed for four years. It’s important to note that’s far from the only reason the transportation method for oil has boomed, as it also coincides with a boom in production here in the U.S., notably from the Bakken Formation in North Dakota.
According to data from the Association of American Railroads, U.S. carloads of petroleum products have more than doubled since April 2010, the first time the State Department delayed Keystone approval.

Slo who are we going to sell all this oil to? You get one guess, and it better start with "China". China is becoming more and more dependent on Middle East oil, and yet is unwilling to spend to protect that oil.

 The U.S., meanwhile, has less and less reason to protect Middle East Oil. So what's the easy solution? China can buy more of its oil from good ol' Uncle Sam. Maybe he'll be able to afford a new barrel.

This is all stuff to keep in mind as America's oil production booms.

Nat-Gas to Gold -- Let Opportunities Unfold

The market outlook this morning is melting down like an ice cream sandwich on the sun-baked sands of Miami's South Beach. I'm so glad I recommended that Gold & Resource Trader subscribers exit three positions yesterday. One was a small loss, but two were nice wins, and in a short time frame, too.

Today, stocks are down and gold is up. I was hoping for more of a pullback in gold on dollar strength, but fear rules the market. So that raises the question: What will gold do when fear subsides?

When that happens, we'll see some kind of pullback, sure. But there are so many bullish things happening for gold right now -- some of them in China, some in Western ETFs, some elsewhere -- that I still think gold's uptrend is solidifying.

We still need a monthly breakout in gold. The big downtrend is in place until that happens. But there is a shift in the wind, and it looks bullish for gold.

Now some of you may be thinking: "Fear isn't going to subside for a long time. This is the beginning of the end -- the big sell-off that very smart people have been warning us about!"

Well, those people might be right. A stopped clock is right eventually. But then again, they were wrong all last year. I'm not saying I have a crystal ball. And there are risks in the market. I think most of the risks are China related, not the currencies of Turkey or Argentina or whatever f--'d up country is seizing the headlines now.  Those can be important IF a momentum of fear builds up because of all the brush fires going on in the emerging markets.  But for now, what I'm watching is copper, as I laid out in my Monday column.

(Updated chart)

It sure looks like copper is going to test its recent uptrend.  We'll what happens then. Also, iron ore prices are at their lowest level since July.

On the other hand, if you want something that is bullish, look at natural gas.

(Updated chart)

Thanks to cold weather that has depleted nat-gas in storage, prices are breaking out. We may see a re-test of the breakout. I would think that would be a buying opportunity in all sorts of things.  This is not a recommendation. Do your own due diligence before buying anything. And remember, weather pushes around nat-gas like a bully pushing around a skinny kid. Those pushes can come from more than one direction.

Other Things I'm Reading ...

‘Fragile Five’ Is the Latest Club of Emerging Nations in Turmoil As I said, this is a worry, but I think the mainstream media is exaggerating that worry.

Is China's Economy Growing or Not? Some great analysis from Econbrowser, and there are lots of charts like this one of China's electricity output and industrial value added.

 Read the rest HERE.

The $604 billion that big tech firms have stashed offshore could threaten their credit ratings. Gee, it's hard to feel bad for these companies when they could be using that cash to boost dividends or invest in America. Anyway, here's a chart to go with that ...

Rare Earths Outlook. One analyst thinks China's output will decline, which will open up opportunities for other, non-China miners.  Okay, but we've been hearing that for years now, haven't we? I do think there are select opportunities in rare earths, but don't count on China scaling back production.

Obama says foreign investors prefer the US over China—and here’s his proof Because one study proves the whole shebang, right?

Obama appears to be referring to this study by consulting firm A.T. Kearney, which finds that for the first time since 2001, China isn’t the world’s favorite destination for foreign direct investment—the US is.

Obama's economic remarks from the State of the Union speech last night.  As I said on Twitter last night: 'President: "That can happen." Dude, not if the orange guy behind you has anything to say about it.'

Iraq and Iran plot oil revolution in challenge to Saudi Arabia Iraq is poised to flood the oil market by tripling its capacity to pump crude by 2020 and is collaborating with Iran on strategy in a move that will challenge Saudi Arabia's grip on the Organization of Petroleum Exporting Countries.

Combined, Iran and Iraq hold greater reserves of oil than Saudi Arabia and the potential with the help of international investment to match its capacity to produce oil, which currently stands at around 12.5 million barrels per day of crude.

Rebels in Syria Claim Control of Resources. Al-Qaeda in Syria -- which is financially backed by our best buddy Saudi Arabia -- now controls oil fields. And just to show you how confusing the whole issue is, that branch of Al-Qaeda is rumored to be working with the dictator Assad in Damascus -- you know, the guy they're supposed to be fighting.  Can we stay out of this quagmire, please?

Be careful today. Good luck, and good trades.