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

Crude oil prices corrected down to a 3-week low before rebounding to just under their recent 1-year high of $82.00 a barrel. That 1-year high is a 43% retracement of the 1-1/4 yr downmove from July 2008’s record high of $147.27 a barrel to December’s 5-1/2 yr low of $32.40 a barrel. Bullish factors include (1) the unexpected declines in weekly crude oil and gasoline inventories (crude -3.94 million bbl versus expectations of a +1.5 million bbl increase) and gasoline (-287,000 bbl versus expectations of a +400,000 bbl gain), (2) the unexpected decline in the refinery capacity rate which fell to its lowest level in 7 months (-1.2 to 80.6% versus expectations of +0.1 to 81.9%) and which also signals further production cuts in gasoline and distillate products in the weeks ahead as refiners cut production, and (3) the prediction from LCM Commodities LLC that crude oil prices are being determined by financial flows and not by fundamentals with crude oil demand being boosted by investors seeking higher returns from commodities.  Bearish factors include (1) the rebound in the dollar to a 1-month high, (2) commentsfrom Libya's top oil official who said that OPEC may keep production quotas unchanged when it meets next month as "there are no signs demand is getting stronger," and (3) the rise in OPEC oil output to 28.76 million bpd in Oct , the highest in 10 months.

OPEC Summary: OPEC-12 output in Oct rose by +80,000 bpd +0.3%) to 28.760 mln bpd from 28.680 mln bpd in Sep, remaining below last July’s record of 32.775 mln bpd. OPEC-11 (ex-Iraq) output in Oct rose by +80,000 bpd (+0.3%) to 26.310 mln bpd.

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