New York oil prices, which have climbed 10 percent since early January, jumped againon Wednesday after the EIA reported that stocks at Cushing, Okla. fell by 2.7 million barrels last week as the newly opened leg of the Keystone pipeline continuing to drain oil to the Gulf Coast. The weekly report showed US crude inventories rising 3.3 million barrels, largely because of a surge in imports which had been abnormally low the week before last because of weather.
Crude stocks along the US Gulf Coast rose by 3.8 million barrels last week suggesting that the oil glut is only shifting from the Cushing depot to coastal refinery storage tanks. It is this situation that is leading to increased calls for the Congress to ease the ban on crude exports so that fracked oil can be sold on the world market. This situation will likely be with US for a while as US oil producers battle refiners, chemical companies, and consumer advocates, all of whom like low oil prices, over the right to export their excess light crude oil.
The EIA lowered its forecast of US oil production for 2014 and 2015. The Administration now forecasts that production will average 8.42 million b/d in 2014 which is up about a million b/d from the 7.44 produced in 2013, but about 130,000 b/d lower than its previous forecast. For 2015 the EIA now forecasts US production of 9.19 million b/d down from 9.29 million. The Administration says these revised forecasts are due to the very cold weather this winter which has been delaying well completions.
Despite the abnormal cold, US distillate inventories fell by only 700,000 barrels last week as opposed to the 2.1 million barrel drop the market had been expecting.
London’s Brent crude climbed on Wednesday to close at $108.79 on the news that China’s January oil imports jumped to an all-time high of 6.7 million b/d, which is 12 percent higher than in January 2013. Brent’s premium over WTI is now down to $8.42. OPEC announced that production from its 12 members increased by 28,000 barrels in January, largely due to the partial return of Libyan production.
US natural gas futures which, had been falling from recent highs set last week, reversed on Tuesday and climbed some 40 cents per million on news of the new storm along the US’s east coast. Analysts are expecting that a very large drop in US natural gas stocks will be reported on Thursday.
Not much change in the various Middle Eastern confrontations. Violence continues apace in Syria, Iraq, Yemen and Egypt. The new Iranian government, however, seems to be making a real effort to establish a new relationship with the rest and to get its economy growing again. Despite hardline opposition in Tehran which is kept mollified by the occasional blast at the US, both sides report progress in the negotiations.
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