After falling for two days, oil prices rebounded on Wednesday after the weekly stocks report showed an unexpectedly large increase in US refinery utilization and a drop of 4.5 million barrels in US crude inventories. US crude stocks are now at their lowest since February. At the close Wednesday, the NY September contract was at $96.07 while the October contract was at only $93.45. London’s Brent has been quieter this week closing Wednesday at $102.26 after trading around $101.50 for much of the week. Louisiana’s LOOP which is the US’s largest oil import terminal has been closed since 13 July for repairs. The closure has not had much impact as smaller tankers are going to other ports and the US is importing less oil than several years ago.
Gasoline stocks rose by 585,000 barrels, indicating that demand, which was 2 percent lower than the same week last year, is still weak. Distillate supplies fell by 1 million barrels with demand up by 5.5 percent over last year. Much of the increase in demand is likely going for exports. Inventories at Cushing Okla. grew by 1.7 million barrels as the Kansas refinery that normally draws 115,000 b/d from Cushing is still closed due to a fire.
Natural gas futures took a small jump on Tuesday after somebody forecast a bout of warmer weather for the US, but fell on Wednesday when the forecast changed to cooler weather ahead. Natural gas futures closed at $3.82 per million BTUs, about where they have traded since mid-July.
Much of the news from the Middle East this week has been good for oil exports to continue normally. In northern Iraq Kurdish and Iraqi forces, with decisive help from US airstrikes, retook the Mosel dam and began moving against IS forces elsewhere in northern Iraq. The atrocities the IS has been committing of late is turning world, and more importantly US, opinion against them. The efficacy of airpower against IS forces traveling and fighting from vehicles and fixed positions in the desert like a conventional army has changed the military equation in Iraq. The strikes are enjoying much public support and will likely continue, thus reducing the IS threat to Iraqi oil production for the time being.
Iraq’s prime minister-designate seems to be making some progress in bringing Kurds and Sunnis back into his government. The gains made by the Kurd’s Peshmerga in routing the IS and saving harmless ethnic tribesmen from being slaughtered has made them the heroes of the hour. Several European governments as well as the US have announced they are sending arms and military supplies to the Kurds who are demonstrating that when properly armed they can be an aggressive and effective military force.
Libya announced on Wednesday that it had reopened its largest terminal, Es Sider, which has been closed since July 2013. This is happening despite heavy fighting still taking place in Tripoli and Benghazi. On Wednesday an Italian tanker took on 600,000 barrels and sailed for Trieste. The oilfield that normally ships 150,000 b/d to Es Sider is due to reopen next week. As traditional buyers have been weary of contracting for Libyan oil that may or may not be shipped, Libya has been forced to cut prices which have attracted Chinese oil companies to buy Libyan crude.
Egypt has been buying such a lousy grade of sulfur-laden fuel oil for its power stations lately that it is plugging up the burners and has taken 6,180MW offline resulting in five-hour rolling blackouts.
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