Demand is dropping faster than OPEC can cut supply.
From
bloomberg.com
OPEC Crude Premium Shows U.S. ‘Awash’ With Oil: Chart of Day
By Grant Smith
Feb. 13 (Bloomberg) -- OPEC’s crude sells for a record premium to New York oil as the group’s biggest supply cut fails to draw down brimming U.S. stockpiles.
OPEC oils typically trade at a discount to crude sold on the New York Mercantile Exchange because they produce less high- value gasoline. The CHART OF THE DAY shows the relationship reversed this year and the basket of 12 export grades from the Organization of Petroleum Exporting Countries was $7.81 more expensive than Nymex futures yesterday.
Crude inventories in the U.S. are at their highest since July 2007, even after OPEC announced a record production cut, as the recession curbs consumer demand. Stockpiles at Cushing, Oklahoma, where the blend traded on Nymex is delivered, swelled to an all-time high last week.
“What this says most is that Cushing is awash with oil,” said Gareth Lewis-Davies, an analyst at Dresdner Kleinwort in London. “Evidence that the OPEC cuts are sufficient hasn’t yet shown up in inventories, and it could be because demand is even worse than people thought.”
To contact the reporter on this story: Grant Smith in London at
gsmith52@bloomberg.net.
Last Updated: February 13, 2009 05:49 EST
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