The fundamentals in the petroleum complex are getting frosty. Oil prices hit another 2 and a half years high before closing lower after the record breaking run of U.S. oil exports ended and as U.S. oil exports suddenly got frozen out. In Saudi Arabia the crackdown on corruption and quest for power turned even more cold after Saudi authorities froze the bank accounts of the former Saudi Crown Prince Mohammed bin Nayef. While oil supply surprisingly rose last week, oil products plunged, a concern as we are supposed to get our first arctic blast of winter as natural gas and distillate supplies are below normal for this time of year. It is a cold world and it is only going to get colder.

Oil had a wild session. It was not sure whether it wanted to focus on the surprise 2.237-million-barrel increase in crude oil supply or the very bullish 3.312 million barrels drop in gasoline supply and the 3.359 million barrels drop in those all-important distillates. Oil also saw some support when the Bureau of Safety and Environmental Enforcement (BSEE) reported that the Coast Guard and the Bureau of Safety and Environmental Enforcement  responded to an oil platform fire in the Gulf of Mexico, Wednesday at the Shell l Enchilada platform approximately 112 nautical miles south of Vermilion Bay, Louisiana.

The crude build was a surprise after U.S. oil exports fell from a record of over 2 million barrels a day to only 900,000 a day. U.S. oil production should rise over the next few weeks and production hit a 5-yr high of 9.62 million barrels a day. While that is impressive it is still well below where the EIA said we would be. That is a misread that has longer term ramifications for many shale producers. Many shale producers will hedge but many are so far underwater it might not make much of a difference to their bottom line. This could set the stage for a rash of mergers and acquisitions in the shale space, but they better hurt as they are already well below the demand growth curve.