Oil prices have changed little this week with NY crude hovering around $93 a barrel and London’s Brent around $112. The weekly US stocks report showed an increase of 15.5 million barrels in the combined crude, gasoline and distillate inventories, the largest increase since 1996. US crude production climbed to 7 million b/d last week and the EIA is forecasting that it will average 7.92 million b/d in 2014. Domestic oil consumption is declining –MasterCard says US gasoline consumption slid to 7.8 million b/d last week, the lowest since its records started in 2004. US crude imports in 2012 averaged 8.65 million b/d the lowest since 1997 and 2.9 percent lower than the same period last year. US gasoline consumption has been dropping steadily since March 2011.
The spread between WTI and Brent has narrowed to $18.66 from $25.53 in mid-November. The Seaway pipeline will begin moving 400,000 b/d from Cushing, Okla. to Houston later this week, up from its current 150,000 b/d. The inventory at Cushing hit a record 50.1 million barrels last week.
Natural gas prices fell another 10 cents per million BTUs on Wednesday on forecasts of warmer weather in the week ahead. Prices have now fallen 20 percent since mid-November and some analysts are expecting them to fall further. The EIA reported that natural gas output continues to increase – hitting a record 2 trillion cubic feet in October.
In the Middle East, Tehran got around to admitting that the sanctions have reduced its oil exports by 40 percent after months of denial about any impact from the sanctions. Iraqi crude exports fell by 272,000 b/d in December partly due to bad weather at southern ports and Kurdistan cutting its contribution to Iraq’s northern pipeline by 100,000 b/d.
The Sunni-Shiite contretemps continues with the Sunnis blocking the roads north from Baghdad for the last two weeks and Baghdad retaliating by closing the border crossing to Jordan in order to hurt Sunni businesses. The Sunnis and Kurds have been boycotting cabinet meetings to show support for the protests. The region has been battered by winter storms this week closing ports and making life miserable for the hundreds of thousands of refugees living in flooded, unheated tents.
Qatar is helping out the increasingly desperate Egyptians with another $2.5 billion loan, bringing total aid to $5 billion. The Egyptian pound continues to fall, as Cairo negotiates with the IMF on the strings, such as reductions in food and fuel subsidies, that would be attached to an IMF loan. Since the revolution, tourism in Egypt has dried up along with much of the economy, The Morsi Islamists are now in charge of the economy and many feel that protests against the economic conditions are not far away.
Unemployment in the Eurozone rose to the highest level since the euro was established as the EU’s economy continues to stagnate.