Oil prices plunged on Tuesday and then rebounded on Wednesday after the US Federal Reserve announced it would keep buying bonds at a steady pace; US crude stockpiles unexpectedly dropped; and the EU put off a decision on a Cyprus bailout. At the close, NY oil was at $92.96 and London at $108.72 with the WTI contract $15.21 below Brent. The weekly stocks report showed inventories at Cushing, Okla. down by 286,000 barrels to 49 million as operators did everything possible to keep the oil moving towards more profitable markets rather than accumulating at Cushing.
Most of the decline in crude inventories, 2.75 million barrels, was along the West coast. The rest of the country actually showed at 1.44 million barrel gain. Total US petroleum consumption dropped 4.5 percent to 17.8 million b/d, the lowest since early January showing that US markets remain weak.
While the economy of Cyprus is a trivial part of the EU, its current economic problems have taken on unusual importance that has roiled the oil markets this week. The outcome situation is seen as a bellwether for the German vision of austerity for the EU. If the Cyprus situation can’t be settled, there are fears for the stability of Greece, Italy, and Spain.
While President Obama is visiting Israel for talks about Iran, Syria, Egypt, and the Palestinian question, the Iranian envoy to the UN is predicting a possible breakthrough on a nuclear deal.
Al Qaeda marked the 10th anniversary of the US invasion of Iran by taking credit for bombs that went off in numerous places, killing 65 and wounding 200. The tensions between Sunnis and Shiites in Iraq continue to worsen.
The diesel shortage in Egypt is becoming a major problem. With supplies of the state subsidized fuel dwindling, people are hoarding it at home in anticipation of rationing which is due to start the beginning of July. In the meantime, the government must reform the subsidy system, which is costing a fifth of the state budget, in order to qualify for the $4.8 billion IMF loan which is vital to keep importing food. There is a real problem there. The army seems to have the canal firmly under control and may end up running the country again whether it likes it or not.
In Syria, the fuss over who, if anybody, used poison gas has dominated the news. The Assad government says the rebels used it; the Russians back this up without saying how they know; the Israelis say somebody used it with giving details; Washington says it is investigating; and outside specialists looking at TV pictures say it does not look like anybody was gassed. It would all be funny except poison gas is one of the red lines that is supposed to bring the US, and other foreign powers into the fray.