Developments so far this week
Brent crude was relatively stable on Monday and Tuesday and then fell $1.46 a barrel on Wednesday to close at $118.20. NY crude climbed a dollar a barrel on Tuesday but fell back on Wednesday after the weekly stocks report showed the US crude inventory climbing to a 22 year high. Weak jobs reports in the US and EU added to the pressure. Inventories at Cushing, Okla. climbed to a record 43 million barrels as producers pushed more oil into the storage complex in anticipation of the reversal of the Seaway pipeline. This will provide cheaper oil to Gulf Coast refiners and reduce the demand for imported oil at the higher Brent prices. US crude production hit 6.1 million b/d last week, the highest since November 1999.

Natural gas futures climbed sharply on Monday and Tuesday as US production continues to decline and with cooler weather in the Northeast. Prices fell again on Wednesday on profit taking and forecasts of warmer weather. The EIA reported that US natural gas consumption in February was at a 22 year low.

The Administration also reported that US gasoline stocks fell by 2 million barrels last week, but remain adequate as the demand for gasoline continues to fall. MasterCard says that US gasoline consumption last week was 5.6 percent lower that the same week last year despite falling prices. Despite the sale of the ConocoPhillips Philadelphia refinery to Delta airlines, analysts are still concerned about the East Coast refining situation this summer as it will take some time to get the refinery into production and there is still a threat that the Sunoco refinery in the area will close.

Attitudes about the future of the US economy continue to flip-flop daily with the latest economic news. The European economy seems to be moving towards a recession while China shows some signs of bottoming out. In the EU the whole strategy of austerity coupled with massive budget cuts is coming into question as unemployment grows.

In the Middle East, the Syrian situation continues to deteriorate even as the UN sends in more observers. Widespread hunger is rampant as the economy has virtually ground to a halt with food supplies at a standstill. Calls for some sort of foreign intervention continue to grow while Moscow remains intransigent in support of its last Middle Eastern friend.

The Iranian confrontation continues to simmer. The revival of negotiations has reduced the level of threats and tightening sanctions seem to be inducing a new sense of reality in Tehran. In Israel, a divide is opening as numerous prominent figures are taking the Prime Minister to task for his threats to attack Iran if nothing is resolved soon. In Washington the determination to keep the situation and oil prices under control until the election remains strong. Two of India’s largest importers of Iranian crude say they will cut imports by at least 15 percent in face of US pressures and the various insurance, shipping and payment difficulties that are getting in the way of doing business with Tehran. An independent report says Iran’s oil exports have reached the lowest level in 20 years.