After six days of decline, oil prices rose 50 cents on Friday to close at $49.93, down $7.67 or 13 percent for the week. Oil prices now have fallen 66 percent since July 11th.
As more production and consumption numbers are released, it is becoming obvious that excess supply is behind the continuing drop in prices. Although subject to later revision, the IEA reports that total world liquids production increased by 1.81 million b/d in October to 86.4 million b/d at a time when consumption is declining. Average OECD consumption in 2008 from January through September is reported to be 1.11 million b/d less than in 2008. Most of this is from a 950,000 b/d drop in US consumption. Chinese consumption during the first 9 months of 2008 was up by only 50,000 b/d while Indian consumption was up by 200,000 b/d.
Beijing reports that demand for fuel has contracted sharply since September due to the credit crisis, and that stockpiles of crude and products have risen “significantly.” Chinese imports of diesel and gasoline have dropped to the lowest level in 14 months.
Supplies for November delivery, however, appear to be contracting. Tanker tracker Petrologistics reports that crude shipments from OPEC will be down by nearly 1.2 million b/d this month. Although still above targets, the cartel is making progress towards implementing the 1.5 million b/d cut agreed on in October.
The export pipeline from northern Iraq to Ceyhan, Turkey was bombed by Kurdish insurgents last week. It may be back in operation after a 3 day outage. PEMEX reports that crude output fell 7.9 percent in October as the Cantarell field continued its 5-year decline. Cantarell’s production is now down to 900,000 b/d from a high of 2.2 million b/d in December 2003. Yet another pipeline was blown up in Nigeria last week, shutting in about 90,000 b/d of production.