CRUDE OIL

FUNDAMENTALS

Ø       The crude oil futures declined to a fresh five months low on Wednesday on rising demand concerns. The losses however were contained by the supply worries after the steep decline in US crude oil inventories. October crude on NYMEX declined 68 cents to close the session at $102.58 per barrel.

Ø       Demand concerns rose in oil market after the Paris-based International Energy Agency (IEA) lowered global oil demand forecasts for 2008 and 2009 in a report Wednesday. For 2008, it sees demand of 86.8 million barrels of oil a day, which is up 0.8% from 2007 levels but 100,000 barrels lower than last month's forecasts. For 2009, it sees oil demand rising to 87.6 million barrels, which is 140,000 barrels lower than last month's estimate.

Ø       Meanwhile, the US supplies of crude, distillates and motor gasoline all dropped last week because of shut-downs in the Gulf of Mexico related to Hurricane Gustav. Crude supplies fell by 5.9 million barrels for the week ended Sept. 5, to 298 million barrels, according to the EIA. Total stocks are in the lower half of the average range for this time of year. Motor gasoline supplies were down 6.5 million at 187.9 million in the latest week, down a total of more than 29 million in seven weeks.

Ø       Meanwhile, The White House said it disagrees with the Organization of Petroleum Exporting Countries' decision to lower output, renewing its call for Congress to act on legislation that boosts domestic energy production. OPEC on Wednesday surprised the oil markets by announcing that it would make a small but symbolic reduction in its output because the oil cartel views the market as oversupplied.

Ø       OPEC agreed to abide by the production limit it had set for its members in September 2007. This would reduce the group’s production by 520,000 barrels per day over the next 40 days. According to the International Energy Agency, Opec members subject to quotas last month pumped 30.4m barrels a day, well above the 29.7m b/d official quota.

Ø       Meanwhile, weather concerns are also keeping the oil market worried about the supplies. Ike is expected to strengthen to 111 mph or higher in the central Gulf, according to the National Hurricane Centre. The hurricane is forecast to bypass New Orleans and the offshore Louisiana oil and natural gas fields and strike the Texas coast on Sept. 13.

Ø       Meanwhile, the market is expected to keep an eye on the weekly US crude supply data to be released Wednesday.

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