"If OPEC decides to cut production in November or December it will take a long time to flow through the system. We are seeing crude stock builds, weak refining margins, gasoline builds as refineries [in the US Gulf] come back on-line,"
(a London-based broker said regarding the time-scale of an OPEC cut to produciton.)
"[given the option of producing gasoline and loosing $4/b or keep the crude as stock] They [US refiners] will choose not to run and this will back more crude into stocks. Hence the backwardation on WTI starting to drop despite low stocks at Cushing. However, with the high credit cost for holding oil in stocks, refineries will try to shut down crude imports as they slow processing units."
(Energy analyst Olivier Jakob on the potential for larger builds in crude stocks, and the subsequent impact on structure of the NYMEX EWTI forward curve.)
Updated: October 9, 2008
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