Until Friday, the oil markets were dominated by a weak dollar which sent futures up from $68 to nearly $73 on Thursday. When oil prices stopped short of the $73 mark, trader interest switched from the weak dollar to the likelihood that world stockpiles would continue rising as refiners cut back for seasonal maintenance. Prices then fell nearly $4 to close Friday at $69.29. For yet another week, the struggle between oil fundamentals and economic optimism kept prices within the $65 to $75 a barrel trading range where they have been for nearly six weeks.
Last week OPEC agreed to keep the current production quotas which call for a reduction of 4.2 million b/d from last fall’s quotas even though quotas currently are being exceeded by 1.4 million b/d. Some cartel members did call for stricter compliance with existing quotas. Even though OECD stockpiles increased by12.8 million barrels last month, prices have remained in the vicinity of $70 a barrel since May which is enough to silence member concerns about stockpile growth. After the OPEC meeting, Saudi Oil Minister al-Naimi said “Economic growth is the name of the game, that’s what’s going to drive the price. As long as economic growth is there, the price is going to go up.”
Some analysts, however, are expressing concerns that long range forecasts of a mild winter could significantly reduce demand for heating oil this winter and others are not so sure an economic rebound will be as robust as many believe.