Prices continued to fall this week, hitting three week lows and wiping out recent gains. However, prices are still some $3-4 above the recent lows set in late August. As could be expected for this time of year there was an increase of 8 million barrels in US crude stocks last week, but a drawdown of gasoline and distillate stocks due to refinery maintenance. As the rate of refining was up slightly last week and there was a small drawdown at the Cushing, Okla. hub, some believe that the maintenance season may be ending.
The weekly report’s production figures, which many distrust, showed US domestic production remained steady last week at 9 million b/d. Futures prices settled at $45.20 in New York and $47.85 in London on Wednesday.
Bad news concerning the oil industry continues to pour in. A new analysis predicts that capital spending on exploration by the largest oil companies will be about 50 percent of the highs they reached in 2013 or about $25 billion next year. Part of this decline, however, reflects the lower costs of oil services and does not necessarily imply that exploration activity will be down 50 percent.
The Iran nuclear agreement seems closer to reality. The US is preparing sanctions waivers; Iran’s Ayatollah has approved the deal; and Iranian officials say they expect the sanctions to be lifted by the end of the year. European oil companies are falling all over themselves to get a piece of the expected surge in Iran’s oil production in the next few years. Tehran has already offered some tempting new terms to attract foreign investment. US companies, however, are largely sidelined in this race as relations between Iran and the US are still not of the best.
The Canadian elections on Monday likely will bring changes to the US-Canadian energy relationship. Whereas the Harper government was in total denial about climate change and carbon emissions, the Trudeau government will adopt a completely different position. President Obama may formally veto the Keystone pipeline in the near future as a way of resetting relations with Ottawa.
New numbers show that Saudi Arabia’s commercial crude reserves are now up to a record 326.6 million barrels, showing that the kingdom did not sell all the crude it is producing. Saudi crude exports in August fell to 6.99 million b/d despite the historically high production of 10.26 million b/d. This was down from 7.27 million b/d in July. Some of this of course is due to the burning of raw crude at power stations in order to support summer air conditioning demand. The IMF reported this week that the Saudis are draining their financial assets so fast that they will be gone in five years unless oil prices rebound or spending is drastically cut.
China announced that its rate of growth in the 3rd quarter year over year was 6.9 percent. Some news organizations played up the fact that this was 0.1 percent higher than their favorite analysts had predicted, while others portrayed it as yet another drop in in China’s growth numbers. Some China watchers believe the official figures are complete fabrications and calculate that China’s real rate of GDP growth is closer to 4-5 percent.
