Author: aspo-usa

Oil prices started the week just below $84 a barrel; plunged to touch $79.25 on Tuesday in reaction to an unexpected interest rate increase in China; and then bounced back to close at $81.69 on Friday as traders decided the rate increase would not slow Chinese economic growth. As usual the value of the dollar, and expectations for same, were behind many of the price movements. The general weakening of the dollar and anticipation that the US will soon begin “quantitative easing” again continues to lend support to prices.

The weekly US stocks report showed total commercial stocks down by 2 million barrels. Gasoline stocks continue to build due to weak consumer demand, while middle distillate stocks continue to fall due to limited economic growth, more air travel, and larger US distillate exports.

After climbing from a trading range in the low to mid $70s in late September, oil prices have remained in the low $80s for the past three weeks – closing at $81.25 on Friday. Much of the daily oil price movements are tied to the dollar rather than news concerning the oil markets. Opinions are mixed as to whether a possible resumption of “quantitative easing” will or will not help the US economy recover. Some believe the $10 a barrel increase in oil’s trading range during the past month is an overreaction to the prospects for economic growth.

The fundamental question remains as to whether demand for oil from China, India, and the oil exporting nations will be so strong over the next two years that it outruns sluggish or possibly falling demand from the OECD countries and begins to drain global stockpiles. Last week there were a number of reports and developments that bear on this issue.