Downside pressures.

1) the IEA came out with their latest report reducing their estimates for 2006 demand and calculating 3Q 2006 had a 1.2 MMBD stockbuild across the globe (funny how OPEC picked exactly the same number for their announced cuts) see http://omrpublic.iea.org/  check out the full report (large pdf) if you like wading through details.

They estimate world demand next year to be 86 MMBD with OPEC's share dropping as non OPEC supply is expected to pick up by 1.5-2 MMBD.

2) OPEC's threatened cuts didn't seem to matter much.  Made the market bounce a few % back toward $60 from the bottom at $56.5 ish but that's about it.

Right off the bat, Indo said since they are importers and can't produce their quota anyway they wouldn't cut the 39 MBD that was their share.  It's hard to believe Nigeria will either as they are having so much internal unrest they can't estimate from day to day what will be operating anyway.  OPEC is becoming more and more an Arab/Persian Gulf group + Venz.  

3. Refinery shutdowns for scheduled repairs are in season.  Lots down in Sept/Oct exacerbating the oversupply of crude in low demand 3Q.

4. Adequate US stocks though dropping back some on products.  Still plenty of crude in tank.

One key signal that US crude supply is robust was the rollover gap when Nov WTI futures expired on or about Oct 20-21.  On that date Nov crashed to $56.8 vs Dec at $58.8.  That rollover gap of $2 is a measure of just how badly speculators didn't want to take physical possession of prompt crude.  Either all the storage was full or otherwise committed as the time value of money would only suggest about 30cts/bbl + tank rental.  

Upward pressures

1. US stocks of mogas dropped from way over usual to just high in the last few weeks.    Refinery shutdowns cut supply, lower prices held down imports of gasoline by 20-30% (300-500 MBD drop) from the summer peak.

2. Heating oil/diesel stocks have dropped from extreme (>154 MMB) to just high (139 MMB).  though much of that appears to be people just working off their 15-500 PPM sulfur stocks which are being banned from road use (road use now < 15PPM while home heat can still use >500 PPM.  In the 80's home heat was as high as 3000 PPM in the US and over 10,000 PPM in non developed countries).

See http://tonto.eia.doe.gov/dnav/pet/pet_sum_sndw_dcus_nus_w.htm
 for stock and other US data.

3) Unrest in Nigeria, strike threats in other locales.

The real key is weather.  It's too early to have real winter weather.  Estimates are for normal to cold in the US Northeast in Dec but until players see a real themometer below 0 F no one seems prepared to get too excited.

Heating oil cracks are still hugely profitable at $12 (dec/dec).  Gasoline (RB) is back up to about $6/bbl.  Refiners are still making plenty of money but not like in the summer.

With a normal to cold winter prices will hold here. Sever cold and they go up. OPEC's cuts and posturing seem to be enough to hold prices steady in the $55-60 range.  If it is warm like last year, they'll have to decide if they want to get serious about big cuts to keep prices up or start fighting and watch them drop into the $40's.