Developments this week
Oil trading on Monday and Tuesday was dominated by the ongoing debt ceiling crisis in Washington. On Monday the markets concluded that a US debt default would not be good for oil demand and the prices went down a bit. By Tuesday sentiment had changed and prices rose a little as the dollar weakened. A spate of news on Wednesday sent US prices down by $2.19 to close at $97.40 after the EIA reported that US crude stocks increased last week rather than declined as analysts expected, orders for durable goods dropped and the dollar jumped on concerns about the durability of the recent Greek debt crisis agreements. The increase in stocks was due to a jump in imports, a drop in refining, and possibly the first round of sales from the Strategic Petroleum Reserve to commercial stockpiles.

In London, where traders are less concerned about US inventories and American economic well-being, Brent crude fell only 85 cents on Wednesday to close at $117.43. As the US debt ceiling is still unsettled with only a few days to go, the course during the next week or so is likely to rest on developments in Washington.

It was reported this week that China is planning to barter for Iranian crude in order to bypass the difficulties that the US financial sanctions have caused for countries trying to purchase oil from Iran. Chinese imports from Iran reached 650,000 b/d June, the highest in two years.

Heavy rains in China during the past two months appear to be easing the power shortage as more hydro power can be generated. Imported Chinese coal prices are easing suggesting that the demand for coal is not as tight as it was in the spring.

Fallout from the Fukushima nuclear plant is posing a growing threat to Japan as unsafe levels of cesium are being found in beef on supermarket shelves and in more vegetables and seafood. More than 2600 head of cattle have been contaminated, some after being fed radioactive hay. Supermarkets started testing beef after radioactive cesium was found in slaughtered cattle earlier this month.

A new poll shows that more than 70 percent of the Japanese people support the Prime Minister’s call to halt all nuclear power production. The Fukushima complex is still leaking radioactivity four months after the tsunami and the public is growing increasingly concerned about the safety. Only 17 of Japan’s 54 nuclear reactors are currently operating. The rest of the country’s plants could be closed permanently by next May depriving Japan of about 30 percent of its electric power. Making up for this loss in the short run can only come from conservation and increased use of thermal generating plants. Some Japanese manufacturers are already talking about moving their production to other places with adequate electricity availability.