On Monday and Tuesday oil prices continued a five-day climb — at one point touching above $50 a barrel on rising stock markets, the Russian gas shutoff, the Gaza fighting, and hopes that the recession would be over in the second half of 2009. On Wednesday, however, the roof fell in with oil falling over 12 percent, the most in seven years, to settle at $42.63. Very bad US unemployment numbers, the glimmerings of a cease fire in Gaza, an unexpectedly large increase in US stockpiles, and a statement by the Saudis that they would not support an oil embargo to pressure Israel all contributed to the decline.

Despite market fixation with the rampant demand destruction that is supposed to be going on due to the faltering global economy, the available numbers still suggest a drop in worldwide demand of hundreds of thousands of barrels per day rather than millions. According to the EIA, US consumption continues to inch up slowly and is now only 2.9 percent below the similar four- week period during 2008. US gasoline consumption is now down by only 2.2 percent over last year. US stockpile builds appear to be coming from a reduction in US refining and increased imports of gasoline rather than a massive worldwide glut of oil.

Most OPEC members have announced the details of their production cutbacks to keep in line with recent quotas. In many cases these cutbacks are being confirmed by customers who say they are expecting smaller shipments in coming months. In another month or two the worldwide demand picture should be clearer as total OPEC production cuts approach 4 million b/d.