1. Production and Prices
Without any significant news to support prices, oil continued to fall this week, settling at $124.44 on Wednesday, down from $146 last week (-15%). Although the weekly stocks report showed that crude inventories resumed their steady fall of late dropping by 1.6 million barrels due to lower imports, gasoline stocks jumped by an unexpected 2.9 million barrels. With the Nigerian and Iranian situations quiet for the minute, hurricane Dolly missing the major oil facilities and China powering down to reduce air pollution during the Olympics, faltering US demand is currently the key force behind falling oil prices.
Mexico announced that June production was down by 11 percent from June of 2007, largely because of a 35 percent year over year drop in production from Cantarell which is now down to 1.01 million b/d, less than half peak production a few years ago.
Shipments through Iraq’s northern pipeline to Turkey, which have been responsible for the large increase in Iraqi exports in recent months, have been somewhat erratic of late. On Tuesday, Iraq paid $50 million of a $100 million debt after a Turkish court had halted Iraqi shipments. Later the pipeline was closed for a day due to unreported causes.
NYMEX natural gas prices have dropped 28% from their highs of roughly $13.50 just over two weeks ago to yesterday’s $9.79 close.
2. Russia and Venezuela
It now appears that the dispute between British Petroleum and its partners in TNK-BP may have something to do with Russian plans to use the partnership as a vehicle to help Venezuela develop its oil resources. At a press conference in Moscow, Presidents Chavez and Medvedev declared that they would work more closely to coordinate their oil and gas activities and work together in foreign policy. Medvedev again raised the possibility of an LNG cartel similar to OPEC.
Reports of power blackouts and diesel shortages continue to appear daily from major cities across India. As India is a large country, it is difficult to assess the social and economic impact these shortages are having. Recent reports speak of panic buying and hoarding of diesel by companies using private diesel generators to keep functioning. In Bangalore diesel sales have increased by 40 percent in recent days which is way beyond the capabilities of fuel suppliers to keep pace.