Oil prices climbed from $65 to $68 a barrel last week largely on strength in the equity markets as some earnings reports beat analysts’ estimates despite being considerably lower than last year. ¬†¬†Worldwide demand for oil, however, remains weak and stockpiles continue to grow. US distillate inventories are now at their highest level in nearly 25 years. The EIA reports that US gasoline demand remains higher than last year despite the precarious state of the economy.

Forecasts on the course of oil prices continue to vary widely with some seeing overproduction leading to $20-30 oil while others talk of an economic rebound taking prices back to $100 a barrel.

The Wall Street Journal reports that OPEC is taking the increase in inventories seriously and is already concerned that prices soon will drop precipitously. There is already talk of an OPEC production cut at the September 9th OPEC meeting. However, given that some OPEC members are unwilling to give up the revenue necessary to meet their quotas, the chances of a further formal production cut six weeks from now do not seem good. The situation could change however if prices should fall rapidly before the OPEC meeting.