Developments this week
Oil prices rose on Monday as Hurricane Isaac triggered the closing of some 95 percent of Gulf oil production and the shuttering of six refineries. By Wednesday, however, it was clear that the hurricane would not be as damaging as feared and prices fell to close at $95.84 in NY and $112.45 in London. The IEA reported that US crude inventories increased by 3.8 million barrels; however much of this was probably due to a surge in imports because of efforts to get ahead of the hurricane.
Releases from the US and OECD strategic reserve to counter high prices continue to be an issue. The White House still is expressing interest in a release, and the G7 finance ministers announced that they recognized the danger to the global economy from high oil prices and called on the IEA to ensure that the world market is well supplied.
The fire at Venezuela’s 645,000 b/d Amuay refinery is out after four days of storage tank fires. The Venezuelans say the refinery will back in operation shortly, but many outside observers have doubts that full operation can be restored quickly.
US gasoline futures spiked as high as $3.20 a gallon on Monday on news of the hurricane and Venezuelan fire. By Wednesday, prices had dropped to $3.10 as the situation improved.
Natural gas prices continued to fall this week closing at $2.63 /million BTUs after having traded above $3.20 early in August.
Violence in the Middle East continues with the pipeline from Iraq to Ceyhan, Turkey closed yet again by sabotage. Syrian troops are said to have killed hundreds of prisoners, and Iran may be sending in more advisors and support troops to help the Assad regime.
In the EU, Chancellor Merkel is trying to preserve Greece’s presence in the Eurozone in the face of rising demands that it should leave. Business sentiment in Germany fell for the 4th consecutive month as it appears the country may join much of Europe in an economic downturn.
In Asia equities fell on concerns that the faltering Chinese economy will outweigh the possibility that the US Fed will soon launch an economic stimulus. Japan has cut its official estimates of future exports as the global economy slows.