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In a shortened trading week, high volatility continued due to the now familiar conflict between a widening world recession and OPEC production cuts. There were, however, surprises along the way. When the weekly US inventory report was released on Wednesday showed US crude inventories falling by 200,000 barrels as opposed to an expected 3 million barrel increase, oil rebounded 14 percent from a drop earlier in the week. The inventory decline was largely due to a decrease in imports which may be only temporary or possibly an early indication that OPEC production cuts are starting to take hold. Prices closed out the week at $40 a barrel, a couple dollars below where they started.
Another major surprise in the week’s US stocks report was an increase in domestic oil consumption. Total US consumption of oil products was down by just 0.1 percent as compared to the same four week period last year. Gasoline and distillate consumption were actually up by 0.8 percent and 0.3 percent respectively. Jet fuel consumption is still down by about 15 percent as airlines reduce flights.
On Friday, natural gas prices fell below $4 per million BTUs for the first time in more than 6 years as the recession curbs demand for the fuel by factories and power plants.