The falloff in oil demand has been so sharp that industry observers say even a cutback in Saudi Arabian oil production may not increase market prices dramatically, Petroleum Intelligence Weekly says.
In nominal times, the upsurge in autumn demand would bolster prices as refiners prepared to meet winter oil needs. But refiners now say inventories are so high that any small upswing this time can be handled solely by drawing down stocks.
It will take an unusually severe winter weather streak to prop up demand appreciably before year-end, and many refiners now expect to carry surplus inventories (particularly gasoline) right through to next spring.
The slide of spot market prices could lead to OPEC price reunification, however, particularly if Saudi Arabia chose to cut daily production. OPEC members agreed to a $32-a-barrel ceiling at its last price meeting, but present Mideast spot crude prices are roughly $33 a barrel.
The newsletter says that the rapid rise of oil prices over the last year has dampened demand far below earlier expectations and that demand projections of analysts in the industry are being scrapped.