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 ConocoPhillips ( COP) jumped 1.1% to $42.26, Chevron ( CVX) rose 1.6% to $67.17, and Exxon Mobil ( XOM) 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 TheStreet.com podcast. Here is a summary of our discussion:
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.
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!