Nothing that governments can do seems to stop falling oil prices; Zero interest rates, Detroit bailouts and substantial OPEC production cuts have had no effect on markets that are fixated on the idea that the demand for oil will soon melt seemingly to nothingness. Last Friday the front month February contract closed at $42.63. Wednesday afternoon it closed at $35.35 a barrel after falling nearly 10 percent during the day. A 3-million-barrel build in US gasoline stocks, an increase of crude stocks at Cushing, Okla. to a record 28.5 million barrels, and yet more gloomy economic data contributed to the drop.
Although demand for petroleum products in the US will be down about 6 percent as compared to 2007, there are signs that the situation may be stabilizing. Retail gasoline now averages $1.65 a gallon. The EIA reported that US gasoline consumption over the last four weeks is only down by 2.7 percent as compared with last year and MasterCard Advisors, who track pump sales, reports a 3.4 percent increase in gasoline sales last week.
Reports that there will be a special OPEC meeting in January continue to gain traction. Saudi Oil Minister al-Naimi continues to reiterate that OPEC is determined to bring stability to the oil market. Officials from several OPEC countries have told newsmen in the last few days that they are preparing to cut exports in January.