Prices and production
Oil started the week strong after China lifted its currency peg, at one point touching $80 a barrel. By Wednesday, however, a dose of bad economic news in the Europe and the US, coupled with another increase in US crude stockpiles, forced prices back down to close at $76.35.
The EIA reported on Wednesday that crude inventories increased by 2 million barrels last week on increased imports. As the API had reported an increase of 3.8 million barrels Tuesday evening, prices rose briefly on the EIA’s smaller estimate. Analysts had predicted a drop of 1.5 million barrels. US oil product consumption averaged 19.6 million b/d over the last four weeks, up 6.9 percent from last year. Gasoline consumption slipped last week, an atypical sign for oil in the midst of the summer driving season. Demand for distillates also slipped last week. US distillate stocks are now at the highest level since record keeping began nearly 30 years ago.
In its Medium-Term Oil Market Report, the IEA is now estimating that world oil consumption will slow over the next five years to 1 percent or 940,000 b/d annual growth. This is a reduction from the previous judgment that the global demand for oil would increase by 1.9 percent each year.
The last few days have brought fresh signs that economic growth is slowing in the EU and the US. Wednesday’s Federal Reserve outlook for US economic prospects was more restrained than usual.
Unusually hot weather in the Persian Gulf continues to cause electricity shortages in Kuwait and Iraq.
On Wednesday BP was forced to raise the containment cap, over the leaking Macondo oil well, for inspection and cleaning after a robotic submarine hit a vent. Although some oil is still being captured through the blowout preventer while the cap is off the well, 18,000 additional b/d will flow into the Gulf. Newly released documents show that BPs worst case estimate for the size of the leak is 100,000 b/d.
The oil industry is cheering the order of a federal judge in New Orleans on Tuesday that lifted the six month moratorium imposed by the Obama administration. Washington is appealing the judge’s order.
In the meantime, thick pools of oil started to wash up along the north Florida coast on Wednesday.
An article in the Christian Science Monitor noted that if, as the result of the Gulf oil spill, the nations with offshore oil production dial back their plans to expand their new offshore drilling and potential production, that action “could speed the arrival of peak oil at a more alarming rate.”