Oil: The Positive and Negative

Crumbling credit ratings in Greece and Portugal have led to a third straight day of decline for oil prices. This fueled concerns that global demand for oil may be slow to rise over the coming months.However, there is reason to be optimistic about the oil market.

U.S. crude oil stockpiles increased 5.3 million barrels last week, the American Petroleum Institute said yesterday. Based on the industry group’s data, that’s the ninth weekly gain, bringing inventories to the highest since May 2009.

Gasoline inventories probably gained 800,000 barrels from 224.9 million in the previous week, the survey showed. Supplies of distillate fuel, including heating oil and diesel, are expected to have risen 1.5 million barrels from 148.9 million. Refiners likely maintained operating rates at an average 85.9 percent of capacity after five weeks of increases.

“Below $81 we will see some fresh buying,” said Hasegawa at Newedge. “Everyone is still expecting the world economy will rebound.”

I’d guess the oil industry will be rebound around the start of summer–not fully, but substantially.