Oil prices have fallen $2-3 a barrel this week on weaker demand, increased US production, rising product stockpiles, and a stronger dollar. At the close on Wednesday, NY oil settled at $94.28 and London at $102.60 with the WTI-Brent spread climbing to $8.32. The weekly stocks report showed stocks at Cushing, Okla. increasing to by 450,000 barrels to 50.2 million last week. The report also showed US gasoline consumptionover the last four weeks at 8.5 million b/d, the lowest level in ten years.

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Peak oil notes - May 23

Oil prices have fallen $2-3 a barrel this week on weaker demand, increased US production, rising product stockpiles, and a stronger dollar. At the close on Wednesday, NY oil settled at $94.28 and London at $102.60 with the WTI-Brent spread climbing to $8.32. The weekly stocks report showed stocks at Cushing, Okla. increasing to by 450,000 barrels to 50.2 million last week. The report also showed US gasoline consumptionover the last four weeks at 8.5 million b/d, the lowest level in ten years.

Natural gas prices continued the rise that began two weeks ago on forecasts of warmer weather ahead. The long-term outlook for the summer months is for warmer than normal weather, but not as warm as experienced in the last two years.

The EU’s oil price fixing investigation continues to roll along with regulators asking trading houses for assistance in the inquiry. Fears are increasing that more firms will be caught up in the probe which involves a substantial fraction of the world oil trade. The British government is considering joining the EU’s investigation.

In the Middle East, Syrian forces, with the help of Hezbollah troops and possibly some Iranians, are pressing an attack to regain the key town of Qusair which controls the road from Damascus to Assad’s strongholds on the coast. The struggle for Qusiar is resulting in some of the heaviest fighting of the war.

The US and Russia are still trying to organize a peace conference amid more atrocities; renewed suspicions that chemical weapons are being used; the participation of what could be thousands of Hezbollah troops; more Iranian arms shipments; and the promise that Damascus will receive advanced air defense systems. All this is clearly bucking up the self confidence of the Assad government and seems destined to prolong the war.

During the week the Syrians and Israelis exchanged fire on the Golan Heights prompting threats from Tel Aviv of the heavy consequences for Syria if it continued attacking.

If nothing comes of the peace talk initiative, the US is threatening to begin arming the rebel forces.

Across the border in Iraq, the violence increased this week with bombings and killings on the rise. The Sunnis are now calling for the dissolution of the Iraqi state and its replacement by a federation that would give more autonomy to the various sectarian and tribal groups. Warnings that a civil war is imminent are occurring daily.

In Iran the Guardian Council has disqualified “moderate” candidates, including former President Rafsanjani and President Ahmadinejad’s preferred successor, Esfandiar Mashaei, leaving only hard core supporters of Ayatollah Khamenei to run for President. When this happens all major state institutions will be under the control of the clerics and revolutionary guard commanders for the first time since the revolution.

The energy crisis in Pakistan is already the worst in history and government is warning that power shortages may worsen in the summer months. Pakistanis already face 12-18 hours of load shedding a day in most parts of the country. The Ministry of Power is way behind in paying for the fuel it has used and the Petroleum Ministry says that without more funds it will be unable to import oil this summer. Some of the problem seems to stem from higher than normal rates of power production during the run-up to the recent election as ordered by the Prime Minister.

A recently released test showed that nearly half the rice being sold in the southern Chinese City of Guangzhou was contaminated with unacceptable levels of cadmium. Last year, Beijing conducted a major survey of soil contamination in the country. At first the results were deemed a state secret, but recently there have been suggestions that the study will be released.

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