Petroleum Complex Outlook - An Excerpt from CRB'S Futures Market Service

Crude oil prices corrected down to a 3-week low from their recent 8-month high of $73.23 a barrel that was a 36% upward correction from the 5-year low posted in December of $32.40 a barrel (which was 78% below July’s record high of $147.27). Bearish factors include (1) comments from Kuwait’s Oil Minister who said OPEC will not reduce production when it meets in Sep, (2) the larger-than expected jump in weekly gasoline inventories which surged by the most in 5 months (+3.87 million bbl versus expectations of +1.0 million bbl), (3) the larger-than-expected increase in the refinery capacity rate (+1.2 to 87.1% versus expectations of +0.1 to 86.0%), which climbed to a 6-1/2 month high and signals increases in gasoline
and distillate production in the weeks ahead, and (4) the prediction from AAA, the largest motorist group in the US, that travel during the July 4 holiday weekend will decline -1.9% from last year, suggesting weak gasoline demand. Bullish factors include (1) the report from the Guardian newspaper that Nigeria is running out of crude to supply refineries because of militant attacks on its oil infrastructure, and (2) comments from the OPEC Secretary-General that the cartel sees “positive signs” for growth in global oil demand and that oil prices as high as $80 a barrel won’t jeopardize a global economic recovery.

OPEC Summary: OPEC-12 output in May rose by +405,000 bpd (+1.5%) to 28.150 mln bpd from 27.745 mln bpd in Apr, remaining below last July’s record of 32.775 mln bpd. OPEC-11 (ex-Iraq) output in May rose by +340,000 bpd (+1.3%) to 25.760 mln bpd.

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