Prices and production
So far this week it has been a perfect storm for oil prices, with the dollar falling to a new 12-month low against the Euro; US crude stocks falling by a twice-what-was-expected 4.7 million barrels (and contradicting the API which predicted an inventory increase); and the announcements that many refineries would be shutting down for extended overhauls in the face of declining margins. A 200,000 b/d decline in imports did not help the situation either and the breaking of a key chart point near $72 also supported prices. After nearly touching $68 on Monday, October oil settled at $72.51 on Wednesday. Brokers are now talking about the retesting of the Augusts highs which was the highest oil has been since the 2008 price spike.
Bulging product inventories, however, are likely to hold prices in check for a while. Implied oil demand fell last week by 418,000 barrels from a week earlier and distillate stocks rose by 2.2 million barrels to the highest level since January 1983. Natural gas prices continued to recover this week, climbing as high as $3.76 after trading nearly a dollar lower per million cu ft earlier this month.
- Several impressive new finds have been announced early this week, including one off the coast of West Africa and yet another in the Santos Basin offshore Brazil.
- Russia signed a 25 year deal with Venezuela to develop part of the Orinoco heavy oil deposits. The $30 billion deal is to eventually produce 400,000-500,000 b/d. As part the deal Venezuela is to receive $2 billion worth of Russian arms.
- In the Niger Delta, the MEND keeps switching signals as to whether they will or will not resume attacks on oil facilities this week.
- In Pakistan where the electricity situation continues to deteriorate rapidly, the government says it has thwarted a Taliban attack on the country’s main oil import terminal.
- The Director of the IEA is concerned that rising oil prices may be putting a damper on an economic rebound. He would also like to admit China and India into the organization even though they are not members of the OECD.