Oil prices are stabilizing after declining on a mostly bearish oil inventory report on Wednesday (see below for more details on the report). Although crude oil stocks declined both gasoline and distillate inventories soared as refinery runs surged. As has been the case for most of this year there is an ample supply of oil in the US and around the world. There is no shortage of oil anyplace in the world. The overall fundamentals remain biased to the bearish side. This will provide a challenge when OPEC meets next week to discuss their forward quota strategy. With the continued E&P success in non-OPEC countries coupled with global oil demand growing at a very slow pace OPEC will be faced with the prospects of potentially having a negative impact on prices if they continue to produce at the current levels. They will have to make a cut either now or during the first half of next year unless the global economy turns around and oil demand goes through a growth spurt. The outcome of this meeting will be widely watched by the industry. The meeting is next Wednesday (Oct 12thth) in Vienna. As has been the case for several weeks the short term movement in financials and commodities has been driven by the 30 second news snippets hitting the media airwaves over the state of the negotiations for a budget deal in the US to avoid the so called fiscal cliff. Based on the movement of some of the Republicans toward agreeing to raise taxes on the wealthy the prospects for a deal are starting to improve. As I have been indicating there will be a deal as soon as both side are done posturing and convinced that they got as much as they could for their side out of the negotiations. Once a deal is reached all of the markets will shift their focus back to the primary price drivers with the state of the global economy at the top of the list. Positive economic data out of Germany this morning (manufacturing orders rising) is offsetting some of the negativity that the EU is still solidly in an official recession. Tomorrow the ever important US nonfarm payroll data will be released. Yesterday the ADP private sector payroll number came in as expected around 118,000 new jobs. Tomorrow the market is looking for the US nonfarm data to show an increase of 90,000 new jobs with the unemployment rate coming in at 8%. I am not certain this report is going to be much of a market mover in either direction as many market participants may discount the results as the numbers were likely impacted by Hurricane Sandy. The global markets are slowly starting to trade like a US budget deal is near. The EMI Global Equity Index has gained 0.6% for the week resulting in the year to date gain widening to 7.4%. There are still four of the ten bourses showing double digit gains for the year with Germany and Hong Kong holding the number 1 and 2 spots. China remains the only bourse still showing a year to date loss at 7.8%. Global equity markets have been mostly a positive for oil prices and the boarder commodity complex this week. Yesterday's EIA inventory report was mixed but biased to the bearish side as total commercial stocks increased on the week. Overall I would categorize the report as biased to the bearish side as total commercial stocks increased modestly even with a decline in crude oil inventories with crude oil imports increasing on the week. Refinery utilization rates increased strongly by 2% on the week to 90.6% of capacity. The data is summarized in the following table along with a comparison to last year and the five year average for the same week. Total commercial stocks of crude oil and refined products increased by 5.9 million barrels. The year over year surplus came in at 38.6 million barrels while the surplus versus the five year average for the same week narrowed to 40.4 million barrels. Crude oil inventories decreased (by 2.4 million barrels) and above the market expectations. However, crude oil inventories have been increasing steadily for most of this year and are still well above the levels they were at during the height of the recession as well as being at the highest level since 1990. With the increase in stocks this week the crude oil inventory status versus last year is still showing a surplus of around 35.7 million barrels while the surplus versus the five year average for the same week came in around 41 million barrels. Crude oil imports increased modestly on the week. PADD 2 crude oil inventories decreased by about 0.4 million barrels while Cushing, Ok crude oil inventories decreased by about 0.2 million barrels on the week. Crude oil inventories in the mid-west region of the US are off of their record high levels as the Seaway pipeline is now pumping oil out of the region as well as refineries returning to more normal operating levels. The decrease in crude oil inventories in PADD 2 and in Cushing is neutral to bearish for the Brent/WTI spread. The Jan spread is trading around the $21/bbl level as of this writing and off of the highs made about a week ago. Distillate stocks increased above the range of expectations as refinery run rates increased by 2%. Heating oil/diesel stocks increased by 3 million barrels on a week that experienced mostly colder than normal temperatures along the highly populated north east. The year over year deficit came in around 26 million barrels while the five year average remained in a deficit of about 31.2 million barrels. Gasoline inventories surges well more than the expectations for a much smaller build. Total gasoline stocks increased by about 7.9 million barrels on the week versus an expectation for a smaller build. The deficit versus last year came in at 2.9 million barrels while the surplus versus the five year average for the same week was about 2.4 million barrels. The following table details the week to week changes for each of the major oil commodities at every level of the supply chain. As shown I have presented a mixed categorization on the week as gasoline and distillate fuel were clearly bearish while crude oil and jet were all bullish. Overall this week's report was biased to the bearish side as total stocks are once again back to increasing.

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