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The week started with prices rising as the stock markets saw some improvement in inter-bank lending rates and the oil markets looked forward to an OPEC production cut on Friday. Oil climbed above $75 a barrel on Monday and Tuesday morning before the roof fell in. The reversal, caused by pessimistic earnings reports, sent the stock market tumbling and oil following right behind. By Wednesday afternoon, oil and stocks were in full retreat with oil falling $5.43 a barrel to close at $66.75 a barrel and the Dow falling 514 points.
The slide was helped by the weekly stocks report which showed crude increasing by 3.2 million barrels, gasoline by 2.7 million barrels and distillates by 2.2 million barrels. Oil consumption, however, rose by 1.7 percent last week helped by increased use of gasoline which is now down by only 4.3 percent over the same four weeks last year. Gasoline prices slipped by nearly 25 cents a gallon last week and are now only a few cents above where they were last year. Given that the shortages across the Southeast are nearly over and that gasoline prices continue to fall it is not surprising that US consumption is moving up again.
Lloyds reports that OPEC exports fell by 900,000 b/d in the four week ending October 5th. Most of the drop comes from the major Gulf producers indicating that supplies are already being reduced.