Developments this week
Oil prices have been quiescent this week with NY oil up a couple of dollars to close at $100.59 and with Brent closing Wednesday largely unchanged for the week at $110.66. The spread between London and NY crude has now narrowed to $9.90 from $27.88 on October 14th.
The two noteworthy developments thus far were the White House’s rejection of the permit for the construction of the Keystone pipeline and the IEA’s reduction of its forecast for growth in global oil consumption in 2012. The rejection of the pipeline permit came in the wake of Congressional Republican efforts to force the President to make a decision prior to the November election. The Canadians say they will re-file an application to build the pipeline. In its monthly Oil Market Report, the IEA noted the likelihood of an economic slowdown if not a recession this year and cut its first quarter demand forecasts by 500,000 b/d and cut the forecast from growth in oil consumption this year by 200,000 b/d to 1.1 million b/d.
The weekly stocks report is delayed to Thursday this week, but the API’s survey says it will show US crude stocks down by nearly 5 million barrels last week.
While oil prices have not moved very much, NY gasoline futures continue to surge higher and natural gas futures continue the decline which has been going on for nearly four years. NY gasoline futures closed Wednesday at $2.83 after trading as high as $2.85 a gallon. This is only about 15 cents a gallon below the highs touched last spring during the height of concerns over lost Libyan production. Natural gas futures traded as low as $2.45 on Wednesday, the lowest in nearly a decade, after having fallen steadily from $11.50 per million BTUs in the spring of 2008.
Not much news on the Eurozone debt crisis this week, but the exchange of bombast, warnings, and threats between Iran and her various adversaries continues unabated. After the Saudis announced that they can make up for any oil lost by sanctions on Iran, Tehran unleashed a round of threats against the Saudis and their Gulf allies. France is asking that the EU embargo on Iranian oil begin in three rather than six months, while China, Japan, Korea, and India that are highly dependent on Iranian oil continue to dance around the issue while trying to placate both sides and not be hurt too badly if the situation deteriorates.
Bombs keep going off in Iraq accompanied by isolated insurgent attacks. Last week saw the first recent attack on foreign oil contractors. The Norwegians are reported to be getting ready to pull out of an increasingly unstable situation.
The nationwide strike in Nigeria protesting the removal of the gasoline subsidy was called off after the government agreed to partially rescind the nearly doubling of gasoline prices. Oil exports do not appear to have been affected by the week-long strike.