Kashyap_Swamy

Commodities Story of the Year: Floating Oil Storage

John,
Your observation about 50m bls being less than one day demand is right, but this is indicative of a larger phenomenon. Oil inventories in OECD are at very comfortable levels (e.g. Cushing storage at 28 mn bls - highest since 2004). Recent OPEC production cuts serve to increase spare capacity, which is in effect in-ground storage.
In the long-term (5 yr horizon), I agree that decline rates will provide strong support to oil prices but I am not so sure about 2009.