Developments this week
Oil prices rose a bit this week, as US crude stocks fell more than expected, Fed officials suggested that more quantitative easing may be in the works and the situation in the Middle East continued downhill. At the close, NY oil was up to $97.26 a barrel, a three-month high, and London closed at $114.91. Most of the week’s news concerned threats of increased violence in the Middle East, which has led to a 10 percent increase in oil prices so far this month.
On Tuesday President Obama threatened to send troops into Syria to keep the country’s stockpiles of chemical weapons from falling into terrorist hands. Moscow issued a statement that its diplomats had talked to the Syrians and had assurances that the weapons were safe and would not be used in the current fighting. Israeli newspapers continue to report that a decision to attack Iran’s nuclear facilities unilaterally prior to the US elections is very close.
The fighting in Syria seems to be spreading into Lebanon as Sunnis and Alawites battle in the streets of Tripoli. This is yet another indication that the Syrian uprising could eventually engulf a number of Middle Eastern countries.
The EIA reported that US crude stockpiles fell by an unexpectedly large 5.4 million barrels last week and gasoline inventories down by 1 million barrels. This was the fourth consecutive week that US crude stocks have fallen. A drop in weekly imports of 500,000 b/d from the previous week was largely responsible for the decline. MasterCard reports that US gasoline consumption was up slightly last week over the previous week, but was still 2.3 percent below the year earlier level. So far in 2012, gasoline demand is 4.4 percent below the same period last year.
US gasoline prices this week are at the highest level ever for late August. Prices are expected to continue climbing until Labor Day and then start falling – unless there are more problems in the Middle East.
The future of the Eurozone is still much in the balance. Meetings are taking place in Greece and Germany this week to try and settle some of the financial issues plaguing the Greek, Italian and Spanish economies. Athens is in dire need of a larger bailout or it will be forced to leave the Eurozone, which could trigger a series of problems across southern Europe. German Chancellor Merkel’s coalition partners are dead set against more money for Greece, opening up the possibility that the Merkel government will fall or the Eurozone will unravel.
Tropical Storm Isaac which currently is south of Puerto Rico looks as if it is headed towards the West Coast of Florida and the Central Gulf oil fields.