Crude oil continues to trade around $70 a barrel as OPEC continues to increase production, stockpiles continue to build, and demand remains weak except perhaps in China. The weekly stocks report showed crude inventories increasing by 2.5 million barrels, distillate stocks increasing by 800,000 barrels, and gasoline stocks falling by 1 million barrels as refiners cut back production.
Thus far in 2009 US oil consumption is down by 6 percent, led by jet fuel which is down by 12.9 percent and distillates which are down by 10.1 percent all as compared to the same period in 2008.
The demand for gasoline in the US during the past month is unchanged from last year despite selling for $1.15 a gallon less than last year. As diesel consumption is down by 10 percent it is likely that there has been a drop in gasoline use by commercial vehicles. This suggests that gasoline consumption by private automobiles in the US is higher than last year despite the increasing unemployment.
China reported that July oil imports increased by 18 percent to 4.6 million b/d as compared to last year.
This report coupled with the announcement that China’s industrial production rose by 10.7 percent in June and 10.8 percent in July year over year led many to believe that Beijing’s $500 billion stimulus is a success.
Skeptics, however, doubt that China can continue growing as rapidly without the stimulus money and easy credit. They believe that much of China’s increased production and imports is going into inventory. They note that exports in July were still down by 23 percent year on year and expect a drop in imports during the second half.
In its monthly report the IEA notes the jump in China’s imports and increases its forecast for global oil consumption by 190.000 b/d during 2009 to 83.94 million b/d. The Agency also notes that increases in Russian output pushed global production to 85.1 million b/d in July. In contrast to other estimates, the IEA sees OPEC production as falling in July on record-low Nigerian production. OECD stocks continued to grow in July to 5.5 percent above last year.