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

Crude oil prices are trading just above their recent 1-month low and modestly below last month’s 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. Bearish factors include (1) the larger-thanexpected increase in weekly crude oil inventories (+1.76 million bbl versus expectations of +1.0 million bbl), (2) the unexpected increase in weekly gasoline inventories (+2.56 million bbl versus expectations of -350,000 bbl), and (3) the drop in OPEC's compliance with its output cuts to 60% in Oct, down 62% in Sep as crude prices near a 1-year high encouraged cartel members to cheat and increase production above their quotas. Bullish factors include (1) the dollar’s slump to a 15-month low, (2) the +19% m/m increase in Oct China crude oil imports to 19.34 million tons, its second-highest total ever as Oct China industrial production soared +16.1% y/y, the largest increase in 1-1/2 years and an indication of strong energy demand, (3) comments from Qatar's energy minister who said that that the crude oil market  is "very comfortable" and OPEC is unlikely to increase production quotas when it meets next month, and  (4) the IEA’s hike in its 2010 global oil demand forecast to 86.2 million bpd, up +140,000 bbl from last month’s estimate.

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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