Economists are predicting the end of the US recession by late 2009, though return to normalcy will be slow and oil demand will continue to be low throughout the year. However, if OPEC members, joined by Russia and other non-OPEC members, can enforce to production cuts, the effect will start to show in about six months.

The economies of the OPEC nations are geared to $60/barrel minimum oil pricing. Below that level, they must start to support their economies with profits from previous years (if not yet spent). Ecuador is about to default on its national debt. Others, like Venezuela and Iran are in deep trouble. Saudi Arabia, the most pragmatic and responsible member of the group supports $75/barrel, about $30 more per barrel than the December average price. Apparently the market thinks so also, Futures jumped almost 12% on January 2nd to over $46.00/bbl. January heating oil prices for 2010 are almost 40¢ per gallon high than today's prices.

We see this as a forerunner of things to come. When the recession is over, supplies will once again be tight as the rest of the world, especially the developing nations, build infrastructure, make things and buy cars and put them on the road. We think we can expect higher prices in '09-'10, indicating that a pre-buy would be the way to go. But it is still too early to tell. We will be watching closely in the near future.