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

Crude oil prices corrected down to a 2-week low from their recent 1-year high of $82.00 a barrel. That 1-year high is a 43% retracement of the 1-1/4 year downmove from July 2008’s record high of $147.27 a barrel to December’s 5-1/2 year low of $32.40 a barrel. Bearish factors include (1) a stabilization in the dollar after the dollar index rebounded to a 2-1/2 week high, (2) the unexpected rise in weekly gasoline inventories (+1.62 million bbl versus expectations of a -1.1 million bbl decline) which leaves gasoline inventories 4.2% above their 5-year average, (3) the decline in total US fuel demand last week to 18.5 million bpd, -0.8% w/w, and (4) comments from OPEC President Botelho de Vasconcelos who said that OPEC may increase production at their next meeting in Dec as oil has risen above $75 a barrel, a price deemed fair by producers. Bullish factors include (1) the larger-than-expected increase in US Q3 GDP, which spurred optimism that fuel demand will increase, (2) the larger-than-expected decline in weekly distillate inventories (-2.13 million bbl versus expectations of -1.0 million bbl), and (3) Goldman Sachs reiteration that crude oil will reach $85 a barrel by year-end on “robust” demand for diesel in China and that crude oil prices will average $110 a barrel in 2010 because oil fundamentals are headed in the “right direction” even as demand in the US slows.

OPEC Summary: OPEC-12 output in Sep fell by –50,000 bpd (-0.2%) to 28.395 mln bpd from 28.445 mln bpd in Aug, remaining below last July’s record of 32.775 mln bpd. OPEC-11 (ex-Iraq) output in Sep fell by –10,000 bpd (-0.1%) to 26.045 mln bpd.

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