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Oil prices started the week at $52 a barrel, climbed to a recent high of nearly $55 on better economic news, and then fell to close back at $52 as the equity markets softened and natural gas prices dropped dramatically on Friday. The weekly stocks report showed an unexpectedly large 3.3 million barrel increase in crude stocks. The report also had total US oil consumption increasing by 2.2 percent to 19.2 million b/d and gasoline increasing by 1.6 percent to 9.1 million b/d. Some analysts are now saying that a new floor of $50 a barrel for oil prices has been established.
Demand for oil in 2009 is still an open question. While the “official” estimates from the IEA, EIA, and OPEC are saying that demand in 2009 will drop by 1-1.2 million b/d over 2008, others believe it is dropping faster. The Chief economist for Total said last week that his company expects a drop in global demand of 2 million b/d this year. Japan reported that its crude imports in February were down 14 percent year over year to 4.25 million b/d.
Early last week tanker tracker Oil Movements reported that OPEC exports excluding Angola and Ecuador will fall by 770,000 b/d in the month ending April 4th. If confirmed, this reduction would nearly complete the official OPEC export cut. Platts reported that rates for Very Large Crude Carries out of the Persian Gulf have fallen to a 4-year low. The number of ship loadings in March was reported as 82 as compared with 93 last November.
On Friday, however, a second tanker tracker, Petrologistics, reported that OPEC shipments in March will be about 1 million b/d above the official quota. This number is even higher than the 800,000 b/d above quota that OPEC announced in conjunction with its last meeting. This new report leaves the status of OPEC’s 4.2 million b/d production cut uncertain. If it is true, then OPEC still has a ways to go before reaching its goals, and this throws into doubt the idea that OPEC will be able to force up prices later this year.
With bad economic news from around the world continuing to come in, the outcome of the race between OPEC’s production cut and flat or declining demand for oil is still very much in the air.