Syria/Turkey dispute reverses crude trend

Long-term supply situation still bearish

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At the moment yesterday’s rally has eased as market participants are once again focusing on the slowing of the global economy and the impact that will potentially have on oil demand growth along with what is expected to be a weekly oil inventory report (EIA inventory report to be released tomorrow morning) that is currently projected to be biased to the bearish side with builds projected for both crude oil and refined products. The market is concerned about the possibility of a supply impact if the evolving geopolitical situating in the Middle East is elevated further. However, the current supply situation is more than balanced as OPEC is producing about 1 million barrels per day above their quota (latest from Reuters) with Saudi Arabian production around the 10 million barrel per day level and based on statements by the Saudi Oil Minister the 10 million barrels per day level is expected to continue through November at least. As has been the case for an extended period of time there is no shortage of crude oil anywhere in the world even with the Iranian sanctions impacting Iran's oil export level.

 

The monthly oil projections will begin to hit the media airwaves today with the OPEC report to be released this morning, the EIA report early this afternoon and the IEA report on Friday morning. The market will be looking very closely to see if all of the reports will once again lower their oil demand projections for 2012 and 2013 as the IMF has once again downgraded their global economic projections and the World Bank lowered their growth forecast for China, the main oil demand growth engine of the world. If oil demand growth continues to deteriorate and if global oil supply remains at the current elevated level oil inventories are likely to build for the rest of the year adding additional downward pressure on oil prices going forward. Barring a geopolitical supply disruption it currently looks like the fundamentals through the end of the year are likely to be biased to the bearish side for oil prices.

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