NY Oil prices advanced the most this year on Tuesday following the news that US durable goods orders climbed more than forecast in February. This sent the WTI discount to Brent to the narrowest since last July. Even an unexpectedly large increase in US crude inventories in the Wednesday stocks report was shrugged off by the markets, allowing NY oil to close 24 cents higher at $96.58 and Brent at $109.60. Oil prices were supported by an increase in US refinery utilization and a larger than expected decline in gasoline and distillate inventories. As there is no indication of a jump in domestic consumption, exports of refined products must be doing well.
With the Cyprus financial bailout seemingly settled, Europe has been quiet this week. Snow and cold weather in the UK has led to reports that the country is about to run out of natural gas – a fear firmly denied by the government. It was announced on Monday, however, that the UK plans to start importing 1.75 million metric tons of LNG from the new Cheniere Sabine Pass facility in Louisiana in 2018.
Gasoline futures jumped about six cents a gallon on Tuesday to $3.11 and held there on Wednesday. Although gasoline futures are currently about 25 cents a gallon below the recent highs set in mid-February, retail prices are only down about 13 cents a gallon and retail prices for regular are still above $4 in California. Natural gas prices which have been climbing steadily on unusually cold weather since mid-February rose 20 cents per million on Tuesday and Wednesday to settle at $4.08.
The Middle East’s various troubles continue. The rebels are getting close enough to lob mortar shells into downtown Damascus, but this may not mean much in the current chaos. The Russians have decided it is probably better to refuel their ships in Beirut rather than in Syria – at least for this month.
Some more Iraqi officials were blown up. There is a debate going on as to whether Iraq can get its oil production to 4.5 million b/d by 2015 from the current 3.3 million. Exxon seems to be making progress at the West Qurna-1 field and says it can increase production from the current 495,000 to 530,000 by July with plans to reach 600,000 by the end of the year.
Senior Iraqi officials, however, say the targets are not realistic and that this year’s production will be closer to 2.9 million b/d. Iraq is going to start selling 4 million barrels of oil per month to Egypt. No price was mention, but Egypt is flat broke and Jordan already is getting Iraqi oil at preferential prices.
Platts says Chinese oil demand was up 4 percent as compared with 2012 for the first two months of this year. OPEC is expecting China’s GDP to grow 8.5 percent this year and 8.9 percent next. While China’s oil demand figures have a history of being erratic, a 4 percent increase sounds about right.