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

Crude oil prices are attempting to stabilize above their recent 3-1/2 year nearest-futures where they have fallen by more than $99 a barrel or 67% from the all-time high of $147.27 a barrel posted in July. Bullish factors include (1) a myriad of stimulus programs from the US, China and the European Union which could prop up their economies and underpin energy demand, (2) China’s 108 bp cut in its benchmark rate in attempt to revive its economy, (3) the drop in the dollar index to a 3-week low, and (4) comments from oil ministers from Iran and Venezuela that OPEC must cut production again after last month’s cut failed to buoy prices.

Bearish factors include (1) Merrill Lynch’s cut in its crude oil forecast for 2009 to $50 a barrel from $90 a barrel and for 2010 to $70 a barrel from $100 as the global economic slump cuts fuel demand and as OPEC production cuts fail to revive prices, (2) the larger than expected build in crude oil inventories for their ninth straight weekly gain (+7.28 million bbl versus expectations of +1.1 million bbl), and (3) Goldman Sachs’ pessimistic economic outlook with its forecast that US GDP will fall by -5.0% in Q4, -3.0% in Q1, and  -1.0% in Q2, further weakening already lackluster US energy demand.

OPEC Summary: OPEC-13 overall output in Oct fell by 70,000 bbl per day (-0.2%) to 32.18 mln bpd from Sep 32.250 mln bpd, further below July’s record of 32.775 mln bpd. OPEC-12 (ex-Iraq) output in Oct fell by -125,000 mln bpd (-0.4%) to 29.095 mln bpd.

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