Today's crude and distillate losses were attributed to the dollar's strengthening and the continued growth of crude and product inventories. The underlying economic conditions are the real problem. Demand is down and continues to deteriorate although there seemed to be demand growth in December as the unexpectedly cold weather and the falling inventories were thought to presage strong demand. This demand growth was really the sell-off of inventory for LIFO and tax purposes and once we entered the new year the true state of industry supply and demand became apparent. The true state of future demand is also now very apparent.

The International Energy Agency (IEA) revised its 2010 forecast continuing to project increased demand but lowering the percentage increase. Believe that this forecast will be revised further downward at a later time. This increased demand does not include refiner profitability in the first quarter in the US or worldwide. Profitability is obviously a function of demand and futures pricing that allows for profitable crack spreads but that has not been happening the past year.

For the week, crude -$4.69 (-5.7%) to $77.96, gasoline -11.05 cents (-5.1%) to $2.0442, distillate -14.46 cents (-6.6%) to $2.0449.