Not So Fast, Oil Bulls

Even though EIA data show a drop in petroleum inventories, there's still trouble ahead for crude oil bulls.
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Thursday's petroleum inventory report from the Energy Information Administration showed that petroleum inventories shrank last week for the first time in months.

The front-month West Texas Crude contract on the Nymex jumped 14% to $39.48 a barrel from $34.62 a barrel on the news. Energy stocks were also jubilant about the EIA report -- shares of


(COP) - Get Report

jumped 1.1% to $42.26,


(CVX) - Get Report

rose 1.6% to $67.17, and

Exxon Mobil

(XOM) - Get Report

rose 1% to $72.61.

Although some bullish analysts are suggesting that a floor in oil and gas prices may be close, a string of very bearish data say otherwise.

I discussed how these data figures could affect energy commodity and stock prices with Frank Curzio on Thursday's


. Here is a summary of our discussion:

EIA Oil Data

Traders use 2007 tactics for 2009 energy data. This probably wasn't smart.

Total petroleum in storage decreased by 6.2 million barrels last week. Crude stocks, excluding the Strategic Petroleum Reserve, fell 200,000 barrels to 350.6 million barrels. Motor gasoline stores rose 1.1 million barrels, and distillate inventories fell by 0.8 million barrels.

What does it mean? Nothing, according to Stephen Schork, energy analyst and publisher of

The Schork Report

. Before the data were released on Thursday, Schork performed a statistical analysis of historical inventories relative to refining run rates.

According to his findings, current inventory and refinery numbers suggest that the weekly oil data will produce "erratic jumps instead of seasonal incremental growth," killing the ability of traders to find dependable patterns in the data. "Bottom line, the DOE reports are scary places to tread," Schork said in his report.

Disturbing Oil Data

Traders who bought the "Asia growth" argument hook, line and sinker are stuffed and nailed on 2008's trophy wall.

Barclays Capital said Thursday that the latest oil consumption data from Asia are showing that the consumption declines it reported last fall were worse than anyone originally expected.

For example, Japan, the world's third largest consumer of oil, reported in August that consumption there was falling 8% year on year. However, this number shifted to 11%, 9%, 12% and 11% sequentially each month after August.

"There are signs of improvement in oil demand elsewhere in the world, but the industrial component of Asian oil demand numbers remain grim, and Japanese oil demand in particular, shows no signs of improvement at all yet," Barclays said.

Futures and Options Very Bearish on Oil and Natural Gas

The latest data from the Chicago Board of Trade's Commitments of Traders report show that the outlook for crude oil and prices by futures and options traders grew more negative this past week, while the outlook for natural gas is so abysmal that it can't really get any worse.

For crude oil, total net-long futures positions fell 12.7% last week, and total net-long positions held by futures and options traders dropped 10.4% during the week.

For natural gas, net-long futures rose 2.1% in the week, while the net length of futures and options rose 13.8% However, the open interest for natural gas futures is short 142,700 contracts, equivalent to a total net long position of -20.2% relative to total open interest. What does that mean? Simple, nat gas can't really go much lower than current levels, but it is still a stinker of a market to invest in.

Rumors From Canada Suggest Evil Omens for Energy Stocks

If you're thinking that credit markets can't get any worse, you are very wrong.

Stephen Schork said that he has heard rumors that Canadian banks are threatening to tighten credit on any energy producer that fails to report an increase in its reserve base in 2008.

Natural gas producers are reportedly facing 15% reductions to their credit lines, and oil producers might be facing 30% reductions to their credit lines.

What does that mean? If there is even a remote possibility that Canadian lenders will drop this hammer on energy producers, E&P stocks with exposure to Canada's credit markets could suddenly enter free fall. This is a nightmare scenario! Investors beware!