The bonds are back as a matter of fact as the world adjusts to the great shifting of risk. With the US debt ceiling debates over for the moment, the world can now focus on more desperate problems in Europe. US paper is highly coveted once again as the idea of a credit downgrade may be put aside for now. Ah yes, it is great to be viewed as the safest economy on the globe once again.

With the global manufacturing meltdown underway, the truth is the demand outlook for oil is getting grim and prices may face even more pressure as OPEC oil production increases. OPEC output hit the highest level since 2008 a fact that may give OPEC sheiks nightmares as economic data across the globe begins to falter. First it was china and the market tried to ignore that, but then came Europe and then in the US a dismal ISM reading of 50.9 and the rout was on. According to data compiled by Bloomberg OPEC production increased 245,000 barrels, or 0.8 percent, to average 29.565 million barrels a day, according to the survey of oil companies, producers and analysts. Daily output by the 11 members with quotas, all except Iraq, climbed 230,000 barrels to 26.845 million, 2 million barrels above their target. OPEC cut its quotas by 4.2 million barrels to 24.845 million barrels a day beginning in January 2009 as demand fell during the last recession. The group's June 8 meeting broke up without an accord, the first time in at least 20 years members couldn't agree on quotas. Saudi Arabia and other Persian Gulf states wanted OPEC to boost output by 1.5 million barrels a day.

The gain was led by the Saudis who I said at the time world produce even more oil than they would have without an agreement. Now with a sharp slowdown in manufacturing is it possible we could be headed for a global oil glut. Even without Libyan oil a slowdown in growth across the globe could suggest s a steep break in price. My only hesitation with getting too bearish is the fact that we are probably getting ready for another round of global economic stimulation. That is a consideration and perhaps the weather in the Gulf.

Emily may be a star of the silver screen but she is also a tropical storm. She is headed towards Florida and while she looks like she will hit Florida's East Coast before she goes to the Gulf of Mexico, we have to watch the impact on production. Even Tropical Storm Don, as minor as it was, did impact production. At one point last week about 12 percent of oil production and 6.2 percent of natural gas output from the Gulf of Mexico was shut. That could impact this week's inventory but might be offset by the release of SPR crude.

Just when the "scientist" that said the polar bears were drowning due to global warming got put on administrative leave for maybe telling a fib or 2, the heat is going to my head! For some strange reason global warming might seem a little more plausible as I sweat buckets - just breathing! - when I step outside! It would make me want to complain but then I remember below zero wind chills by the lake and I'm ok with sweating for a little while longer. Have you seen what Reuters news printed? "The intense heat wave that has dominated much of the United States for weeks drove population-weighted cooling degree days in July to their highest since records started to be kept in 1950, an MDA EarthSat Weather meteorologist said on Monday. "We were expecting a hot July but nowhere near that intensity. It blew away the previous record," said Robert Haas, operations manager at private forecaster MDA EarthSat in Maryland. Haas said PWCDDs for the month of July totaled 412.5, easily beating the previous record of 386 in 2006. The next hottest July totaled 381 in 1980, with last July close behind at 380.5. The 10-year normal for July PWCDDs is 337, with the 30-year average at 327.7. There were other records broken last month including the hottest seven-day span (through July 24) at 108.3, beating the previous high of 103 from August 2006. In addition, two daily records were set, first on Thursday, July 21, with 16.25 PWCDDs, then again on Friday, July 22, with 16.91 PWCDDs. Prior to that, no single day had topped 16 PWCDDs, with the record of 15.94 logged in July 1980. Haas said going forward, heat was likely to continue but not at the same extremes. "The first half of August could be in the top five, and this summer (June through August) could come pretty close to last summer's record," he said. Last summer, PWCDDs hit an all-time high of 1,018, easily eclipsing the previous high of 958 from 2005 cooling degree days -- a measure of how much the mean daily temperature is above 65 degrees Fahrenheit (18 Celsius) -- are used to estimate energy requirements for air-conditioning or refrigeration. They are then weighted to reflect population differences in specific states and regions.

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Phil Flynn
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