Oil longs took some profits as OPEC pumped up their monthly production numbers in order to make a case for a bigger share of OPEC quota. As OPEC and non-OPEC nations have agreed to limit its total oil production to a range of 32.5 million to 33 million barrels, the breakdown of who gets to pump how much is the focus of the conversations. We already reported that Russia is inflating its own oil production numbers that they said was at a record 11.2 million barrels a day.

Now it is being reported that Venezuela and Iraq are stating their own figures on how much crude they produced in September were 565,000 barrels a day higher than estimates as compiled by the Organization of Petroleum Exporting Countries from so-called secondary sources according to Bloomberg. OPEC also slightly lowered their demand forecast and suggests that even with a freeze and a cut, we may still see more - not less - OPEC oil next year. Of course, in reality, that may not matter because we expect demand should be able to make that up but that is assuming we don’t see a global economic crisis re-develop. That is still the risk to our mid $60 plus by year-end oil forecast.

This may be more worrisome that normal because Chinese trade data came in much weaker than expected, raising concerns that Chinese exports to Europe may have dropped due to Brexit fall out. The Irish Times reports, “according to a trade-weighted index measuring sterling against a basket of its trading peers, the pound has now slumped to its lowest on record, stretching beyond the introduction of free-floating exchange rates in the 1970s and all the way back to the mid-1800s, according to data compiled by the Bank of England. The pound’s effective exchange rate, which is weighted to reflect the UK’s trade flows, hit a low of 73.38 on Tuesday – weaker than the depths hit during the financial crisis, Britain’s ejection from the European Rate Mechanism in 1992, and its decision to leave the Gold Standard in the 1930s. The lowest level in 168 years.”

Oil also is getting a look at the Energy Information Administration (EIA) weekly inventory reports and if it is anything like the American Petroleum Institute(API) report, we could see the first crude oil supply increase in 7 weeks.The API said crude stockpiles rose by 2.7 million barrels and while that was bearish, it was offset somewhat by an unexpected 1.35 million barrel draw in the delivery point Cushing, Oklahoma. The bearishness of the crude number was also offset by a larger than expected 4.52 million barrel drop in Distillate stocks.

Gasoline stocks came in up 168,000. The most impressive part of the API report was that despite Hurricane Matthew and tropical storm Nicole, imports still increased by 620,000 barrels per day (bpd) to 7.6 million bpd.

The EIA also will release its weekly natural gas storage number that we think should come in at 83 bcf. That injection, while the largest in a long time, is still below the five-year average.

The inability to stay ahead of the average injections going into winter will raise questions about supply in the future. With record demand and falling supply, the chances for winter price spikes are high. It seems many others are also warning of the same thing and we could see a winter price premium start to really build.