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As bad economic news continues to pour in, oil prices continue to fall. Oil closed last week near $55 a barrel, but by Wednesday it had sunk below $47. There is widespread skepticism that OPEC can actually organize a multi-million barrel production cut despite a stream of statements by OPEC oil ministers that there will be a substantial cut at the Oran meeting on December 17th. The average price received for OPEC crude will soon be in the $30’s. A survey by Reuters suggests that during November OPEC was able to cut about a million b/d of the scheduled 1.5 million b/d reduction.
With gasoline in the US now selling for an average of only $1.80 per gallon, oil consumption in the US was up slightly to 19.6 million b/d. US consumption appears to be stabilizing at a level about 6 percent lower than last year.
The US stocks report shows crude inventories above average, product inventories low and refineries operating at only 84 percent of capacity. There is widespread speculation that oil will continue to fall until OPEC actually makes additional production cuts.