After the markets digested China’s $586 billion stimulus package on Monday, prices fell from a week’s high of over to $65 a barrel until at one point oil was trading below $55. All the bluster about future production cuts could not compete with an avalanche of bad news about the global economy. Oil closed out the week at $57.04 a barrel.

The weekly US oil stocks report shows US gasoline consumption continues to recover from last summer’s $4 – 5 a gallon prices. The average US retail gasoline price is now down to $2.10 and there have been reports of it selling for as little as $1.50.

The IEA and the EIA cut their forecasts for oil demand during the rest of this year and next year. Both now see oil consumption as basically flat through 2009 in contrast to the annual increase of 1 million b/d plus that we have seen in recent years. The EIA is now forecasting that for 2009, global demand growth will be significantly less than the growth in non-OPEC supply as projects that are nearly finished come into production.

The IEA reports that global oil supply increased by 1.8 million b/d during October to 86.9 million b/d, as production outages eased. Preliminary October data show a steep rise of 51.2 million barrels in OECD stockpiles. These increases are consistent with the rapid fall in prices from $105 a barrel in late September to $60 a barrel six weeks later. The 1.5 million b/d OPEC production cut was not scheduled to start until November 1st and will take at least two months to fully implement.