Developments this week
The growing turmoil in the Middle East coupled with the sanctions on Iran’s exports seems to be outweighing indifferent economic prospects in the EU and weak gasoline demand in the US. Since early last week, oil prices have risen by nearly $8 a barrel to close at $93.36 in NY and $111.94 in London. The weekly US stocks reports which showed a 3.7 million barrel decline in crude inventories and a 1.8 million barrel drop in gasoline stocks, contributed to a price jump on Wednesday which at one point took NY prices as high as $94.72 and sent London up to touch $113.20.
Iran seems to be determined to help the Assad government remain in power despite the numerous setbacks in recent weeks. A representative of Iran’s supreme leader Ayatollah Khamenei showed up in Damascus this week to show Tehran’s support and announce that Syria was an essential part of the “axis of resistance” (Iran, Syria, Hezbollah, and Hamas) that Iran will not allow to be broken.
The capture of one of several busloads of what appear to be some flavor of Iranian military personnel in civilian clothes in Damascus this week underscores the new dimension to the uprising. Defectors from the Syrian army have long maintained that Iranians have been helping suppress the uprising by accompanying units into battle. This development will likely lead to increased support for the rebels by foreign governments thereby prolonging the agony. The attack on Egyptian and Israeli military outposts in the Sinai this week, which is being blamed at least in part on Palestinians, is simply another aspect of a generally deteriorating security situation. Egypt is already retaliating against the Palestinians.
US gasoline prices continue to rise and are now up by 25 cents a gallon in the past month. A fire at a California refinery is likely to raise prices by another 35+ cents a gallon in that state, based on what happened after a similar fire at the plant several years ago. Pipeline and refinery problems in the Midwest have been blamed for higher prices in several states. MasterCard and the EIA report that US gasoline demand is running some 4 percent lower than at this time last year when gasoline prices were just about the same as they are now.
US natural gas futures have traded between $2.90 and $3 this week on expectations that cooler weather will soon be arriving reducing the demand for air conditioning.
Although there have been no announcements this week, it is widely believed that the central banks in the US and EU will be undertaking further stimulus measures shortly.