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

Crude oil prices extended their five-week uptrend to a 2-month high, just below January’s 16-3/4 month high. That 16-3/4 month high of $83.95 was a 45% retracement of the 1-1/2 yr down move from July 2008’s record high of $147.27 a barrel to December 2008’s 6-yr low of $32.40 a barrel. Bullish factors include (1) the unexpected fall in weekly gasoline inventories that declined by the largest amount since Oct (-2.96 million bbl versus expectations of no change), (2) the larger-than-expected drop in weekly distillate supplies which fell to a 10-month low of 149.6 million bbl (-2.22 million bbl versus expectations of -1.0 million bbl), (3) increased energy demand from China after Feb China crude imports rose +8.2% m/m and +58% y/y, and (4) the report from CTI Shipbrokers that said the volume of crude oil stored on  supertankers has more than halved and has fallen to 43 million bbl last month from a record 90 million bbl  in April. Bearish factors include (1) the drop in OPEC compliance with its production cuts to 53% in Feb,  down from 56% in Jan, as cartel members increased production above their quotas to capture recent high  prices, and (2) comments from the Kuwaiti OPEC delegate Mohammed al-Shatti who said that oil is unlikely  to stay above $80 a barrel because member states of OPEC are overproducing and global crude stockpiles are high.

OPEC Summary: OPEC-12 output in Feb rose by +125,000 bpd (+0.4%) to 29.170 mln bpd from 29.045 mln bpd in Jan, remaining below the July 08 record of 32.775 mln bpd. OPEC-11 (ex-Iraq) output in Feb rose by +145,000 bpd (+0.5%) to 26.785 mln bpd.

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