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Oil prices moved above $75 a barrel early last week as the markets anticipated a cut in OPEC production. By Wednesday, however, fears of a deepening recession, falling equities markets, a rising dollar, and increasing US stockpiles overcame concerns over the production cut to send the markets lower, closing out the week at $64.15. Early today oil fell to below $62 a barrel.

There were new reports of falling oil production last week. Lloyds reported that OPEC exports fell by 900,000 b/d during September. The IEA reports that total liquids production in September decreased by 1.09 million b/d to 85.5 million b/d.  Part of this drop was due to the hurricane disruptions in the Gulf of Mexico. So far in 2008, world production has been averaging 86.9 million b/d as compared to 85.4 in 2007.

The EIA released figures for crude oil production in July showing an increase of 840,000 b/d to 75.1 million b/d over June’s production. Considering world economic developments in the last three months, the July record for crude production could well turn out to be the all-time peak.

Roughly a third of US Gulf of Mexico oil production is still shut-in by hurricane damage; however this shortfall is being made up by lower demand and increased imports of crude and gasoline.

The widely reported drop in US demand for oil products may have bottomed out due to falling gasoline prices. The average US price for gasoline is now $2.67 which is down over a dollar a gallon in the last month and nearly 20 cents below the cost of gasoline one year ago. The EIA reports that US oil consumption over the last four weeks is down 8.5 percent compared to last year but that gasoline consumption is only down 4.3 percent. The previous week’s figures were an 8.9 percent drop in overall oil consumption and 5.2 percent lower gasoline consumption.