Prices and production
Oil prices continued to hover around $80 a barrel this week as stockpiles continued to grow; economic news was spun to suggest an economic recovery was under way; the EU went back of forth on what to do about Greece; and the Euro sunk to a 10-month low against the dollar.
The weekly stocks report showed a 4 million barrel increase in US crude inventories, more than the 1 million barrel increase analysts expected and the 2.7 million barrel increase estimated by the API. US demand for petroleum products during the last four weeks is up 3 percent over last year, but demand remains weak. Refinery utilization is picking up as refiners shift to summer blends. Average US gasoline prices are expected to rise above $3 a gallon as the more expensive summer blends come to market.
The Iranian situation continues to bump along with Tehran saying it will cooperate; Washington organizing sanctions; Moscow considering sanctions; and Beijing remaining adamant that a good round of diplomacy will settle the matter.
Among the other developments so far this week was Brazil’s announcement of yet another deepwater find; India’s announcement that its onshore oil production may peak this year; and Russia noting that its February oil production neared a post-Soviet record. China announced that its economic growth may be slowing a touch.
The most bizarre development of the week was a claim by a Spanish judge that he has evidence the Chavez government in Venezuela conspired with Basque separatists and Columbian rebels to assassinate Columbia’s President. This is not going to help Venezuela’s efforts to obtain electricity from Columbia to ease the current shortage.
Yet another round of suicide bombings that kill dozens serves as a macabre reminder that Iraq’s elections will be held on Sunday. Nearly twice as many people were killed by bombings in February as in the preceding month. Most observers agree that the outcome of the elections will depend on whether Prime Minister al-Maliki can convince voters that his plans to increase oil production to 12 million b/d in the next six or seven years can come to fruition.
Should al-Maliki prove successful, Iraq could become the world’s largest oil exporter, earn $100s of billions in revenues, and possibly delay the decline in world oil production by several years.
Offsetting the prospects of fabulous riches are the realities of Iraq: the impeding withdrawal of US troops; the Sunni-Shiite split; a fractionated body politic; a decrepit infrastructure; the Kurds; and, above all, continuing violence.
Polls are showing that al-Maliki should win a plurality, but not a majority, forcing him into a coalition with other Shiite sects and parties. Even if the political differences remain quiescent, there is general agreement that achieving substantial increases in oil production in the immediate future will be a very tough job — even for the world’s preeminent oil companies.