Oil prices surged on Wednesday following the news that US crude inventories had fallen by 4.2 million barrels last week. Profit taking and increasing gasoline inventories kept prices from moving higher. This news of the crude inventories was not unexpected as production from the Alberta tar sands has been down by about 1 million b/d for the last three weeks. Correspondingly, US crude imports were down by 362,000 b/d which amounts to more than the decrease in crude stocks. Tar sands oil is heavy and moves slowly through the pipelines taking a month or so to reach US crude tanks. The Alberta firestorms have now moved beyond the crude production areas so that output is on its way up. Given the lags in starting production, processing the sand and moving the oil to the US, however, it will probably be another month or two before the situation normalizes.
Futures prices closed on Wednesday at $49.56 in New York and $49.74 in London, having not yet broken the $50 barrier. Gasoline futures, however, fell after the EIA reported a 2-million-barrel increase in US gasoline stocks. Gasoline sales have been strong this winter as US motorists took advantage of low prices. In the past month, however, retail gasoline has risen by 15 cents and is now averaging $2.28 a gallon. The AAA is projecting that some 38 million Americans will be traveling this week, up by 700,000 since last year. This could be the second highest Memorial Day travel volume on record and the most in ten years.
Iraqi oil production is now about 4.5 million b/d, up from April, but below the nearly 4.8 million produced in January. Production in Iraq has been bouncing around by 100-200,000 b/d depending on various outages and weather problems. The oil ministry believes capacity is now around 4.9 million and hopes to increase this to 6 million in the next three years. Some believe that electricity shortages combined with the unsettled political conditions will keep Baghdad from reaching this goal. The protests in Baghdad last week spread to the Iraqi oil capital of Basra with crowds demanding water, electricity, and jobs. They were dispersed by the security forces causing casualties.
Kurdish oil exports in April averaged over 500,000 b/d after a number of disruptions of the pipeline to Turkey last winter.
The oil refinery strike in France is leading to shortages across the country. Total, the major French oil company, says it is rethinking further investments in France due to the labor union situation. Shell announced that it is cutting 2,200 more jobs to withstand the “lower for longer” oil price situation.
The North Yorkshire County Council has approved a permit to drill for natural gas using hydraulic fracturing. This is the first such permit approved in the UK since 2011.
The tragedy that is Venezuela continues to get worse with widespread food shortages, no medicines, little electricity, and widespread unemployment. The government spent the weekend mobilizing its armed forces in an exercise to deter a non-existent US invasion.
