In the last three days oil prices have bounced between $62 and $71 a barrel in response to optimism stemming from the US elections, worsening economic data, stockpile increases, and the OPEC production cuts. Tuesday saw a 10 percent jump and Wednesday a 7 percent decline with oil closing at $65.30. For the last three weeks oil has traded between $60 and $70 a barrel bounded by fears of a global depression on the downside and further OPEC production cuts on the upside.
This week’s oil stocks report showed US refining dropping a bit with steady crude inventories and somewhat larger gasoline and distillate inventories. Demand for gasoline in the US is still rebounding from the well-publicized consumption drops during August and September when prices were much higher and the gulf hurricanes interfered with distribution.
The EIA reports that gasoline consumption over the last four weeks is now around 9 million barrels per day, down by only 2.3 percent from last year. Even MasterCard, which has been issuing reports of falling gasoline sales for the last six months, now reports that US consumption increased by 1.3 percent last week to 9.01 million b/d which is in agreement with the EIA consumption figure. The average US gasoline price is now down to $2.36 a gallon or $1.74 below the July high.
Despite the relatively low gasoline prices, US car sales plunged in October with GM registering a 45 percent decline due to sagging consumer confidence and much tighter loan standards. Detroit is now losing money so rapidly that a major restructuring of the US automobile industry seems likely within the next few months. The Bush administration has rejected a direct bailout, but Detroit is lobbying the Congress.
Despite official optimism that China will be able to weather the global economic storm, evidence continues to accumulate that their economy is slowing and that oil imports are dropping. A report this week says that Beijing will not buy any diesel fuel in November after having purchased a record 7 million barrels in July just prior to the Olympics.