Bailout Skepticism

Oil had been trading near $40 for about two weeks, underpinned by OPEC production cuts. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global crude supply, said earlier this week it has completed about 80 percent of 4.2 million barrels per day of output cuts announced since September.

“OPEC is following through, and that’s supporting prices,” Chu said.
Some crude investors have taken heart from the fact that oil prices have not retested five-year lows of $33 a barrel, hit in December, despite an avalanche of dismal economic and corporate news in the last month.

“Even with the bad news so far, the oil market isn’t tanking,” Chu said. “It’s a signal we could be at a bottom.”

A weekly report Wednesday from the Energy Information Administration showed that crude inventories jumped by 4.7 million barrels for the week ended Feb. 6, more than an increase of 3.4 million barrels expected by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.

Including last week’s build up, crude inventories have swelled by more than 30 million barrels in the past six weeks.

Others feel that there is no reason to think this trend will not continue of oil building, bad economic news in the short term and prices will fall as they have other the past couple of days.
It a matter of public opinion on how well the bailout is going to work that will determine the stock market, oil prices and a lot of other things.

At this point we also continue to believe that short term oil is going to stay below $40 and will touch $29 a barrel. Though refiners are cutting production to help ease the fall in finished product such as diesel and gas, so at the retail level you have not seen the prices going lower.
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