Developments this week
NY oil climbed smartly on Monday and Tuesday trading above $94 a barrel for a while after opening at $87 on Monday. Part of the strength came from reports that the glut of oil at the Cushing, Okla. NYNEX delivery point was starting to ease, closing the spread between London and NY. On Wednesday the markets reversed closing at $90.20 in NY and $108.91 in London after the US stocks report showed an unexpectedly large 4.7 million barrel increase in US crude stocks and the negotiations over the EU debt crisis stalled. The spread between NY and London crude narrowed to $18.71 on Wednesday after having been as much as $27.90 early in October.
The large jump in US crude inventories was due to a large increase in crude exports last week which averaged 1.5 million b/d higher than the previous week. Over the last month US crude imports have been averaging 8.8 million barrels per day. The 9.4 million b/d brought in last week, 600,000 b/d above the recent norm, accounts for most of the 4.7 million barrel increase in US crude stocks. Total US commercial petroleum inventories increased by only 700,000 barrels last week.
US gasoline consumption remains weak, down by 2.7 percent from last year. Distillate fuel deliveries were up by 7.5 percent over last year, but much of this may be destined for export.
Pessimism about a long-term solution to the European crisis is on the rise. At this point it seems that the best that can be hoped for is some fix for the immediate Greek default problem which will only kick the problem down the road for a few months. There are so many conflicting plots, subplots, agendas, and hidden agendas which involve so many players in the EU debt negotiations that a lasting solution seems highly unlikely.
The manifold problems in the Middle East bump along. The EU stepped up sanctions against Syria; Yemen has permanently closed its Marib export pipeline after repeated attacks; and an increasing volume of Libyan oil is being moved to the coast. A political settlement in Libya is nowhere in sight suggesting that it may be a while before significant exports are resumed.
China announced that its industrial output is expected to grow by 11 percent this year. There are new reports of diesel shortages across China. Chinese Premier Wen Jiabao said the government is studying “simulative policies” to step up growth. Diesel shortages there are normal during the September and October harvest seasons, but this year they seem to be worse than usual.
A new UN report says the world’s population could more than double to 15 billion people by the end of the century. The Chairman of Population Matters, which advocates population control, reacted to the news by saying, “Our planet is approaching a perfect storm of population growth, climate change and peak oil.” “The planet is not actually sustaining 7 billion people.”