Oil Inventories Plummet, Regardless of OPEC Production Targets (USO)

OPEC had noted that it would keep production levels unchanged, but also argued for a $75 ideal oil price.  Whether or not the cartel that does not want to be called a cartel cuts or boosts production, we have just seen our third drop in weekly oil inventories.  The DOE noted that crude oil stocks fell by more than 5.4 million barrels to 363.111 million barrels for the week.  Economists were looking for a drop of 1 million barrels.  Dow Jones had a consensus estimate of roughly -500,000 barrels.

This has acted to support higher oil prices this morning as the United States Oil (NYSE: USO) ETF is up 2% at $35.30 and NYMEX Crude is up $1.00 at $64.45 per barrel.

Gasoline stocks fell less than expected by about 537,000 barrels to a level of just over 203.4 million barrels.

Whether you believe higher rates are coming or not, all the fears of inflation where there when oil was still well under $50.00.  With energy prices getting back up here the fears may start to look more like inevitable events.

The only good news is that we are still entering the summer season with much higher than normal oil inventories.

JON C. OGG
MAY 28, 2009