two factors of physical delivery and contract rollovers will be bearish for crude oil prices over the next couple of weeks
Despite the recent price surge in crude oil this week, basically going from $81.50 to $87 a barrel within this week–thanks to a Fed’s QE2-induced weak dollar– oil inventories actually added another 2 million barrels build to the current stockpiles.
These are the highest inventory levels for crude in 2010 and are just shy of the 370 million mark, which will be punctuated next week with another build in crude stockpiles. (See Stocks Chart from the U.S. EIA)
OPEC Compliance – 61% and Going Lower
Oil imports fell to 8.6 million barrels per day from the prior week’s 9.5 million (See Chart). So we even had a build with lower imports, and this trend will not continue as even before the recent price spike, OPEC members were producing beyond quotas (OPEC average compliance rate was at 61 percent in Oct.)
With elevated oil prices and the need for revenue in these challenging times for countries struggling with increasing debt burdens, expect the over producing to only get worse.