Oil prices fell this week on continuing weak demand in the US and the possibility that Libya will soon resume oil exports. London oil is down by over $3 a barrel to closeWednesday at $104.79 with NY futures down to $99.62. While the weekly stocks report showed the first drop in US crude inventories in 11 weeks, it was ignored by the markets as a four-day closure of the Houston Ship Channel slowed deliveries to refineries in the Houston area last week. Oil continues to be pumped from the Cushing, Okla. storage facility to tank farms along the Gulf Coast leaving stocks at Cushing at the lowest level since 2009. This week’s trading has left the WTI/Brent spread at $5.24, the narrowest since September.
Refining climbed back to 87.7 percent of capacity last week suggesting that US refineries are coming back on line after the usual March maintenance. The EIA reported that there was no increase in lower-48 oil production last week. There are growing concerns that the EIA estimates of US shale oil production this winter are running way ahead of what Texas and North Dakota are reporting.
The top news of the week has been renewed negotiations between Tripoli and Benghazi over reopening the oil export facilities in eastern Libya. Local militias’ plans to export the oil without Tripoli’s permission were cut short the week before last when the US Navy halted an unauthorized tanker shipment and returned it to the government in Tripoli. With the US Navy rather than the impotent government in Tripoli enforcing the ban on unauthorized exports the militias in Benghazi likely saw there was no future in trying to market the oil by themselves and began negotiations to reopen the oil ports.
The Ukrainian situation has remained about the same this week with no new signs that Moscow is planning to seize more of the country. Gazprom did hike the price it charges Ukraine for natural gas by removing the 30 percent discount it had agreed to in December. Moscow continues to claim that the Ukraine owes it $1.7 billion for gas already delivered.
In the Middle East, shootings and bombings continue in Iraq; the Saudis have moved to forestall a succession crisis by naming a new deputy crown price from a generation younger than grandchildren of King Abdulaziz who founded the nation and which has been supplying rulers for many years; and Egypt is finally moving on a plan to require smartcards to purchase motor fuel in the country. Cairo’s move is intended to cut back on the massive state subsidies for motor fuels.
In the Western Hemisphere the end of the rainy season is leaving the California snowpack at only 32 percent of normal, raising concerns about water supplies this summer; Mexico’s crude production in March fell to the lowest level since 1995; and Venezuela has started handing out ID cards to curtail food hoarding.
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