Oil prices drifted downwards on Monday and Tuesday of this week.  In the US, tepid demand was the driving factor while London was influenced by a partial return of Libyan oil production.  An unexpectedly large drop in US crude inventories of 7.7 million barrels , vs. the 800,000 barrel decline expected by analysts, sent NY prices up $1.58 on Wednesday to close at $94.17 a barrel. US crude stocks have fallen for seven straight weeks, dropping by 41.2 million barrels since late November – the largest seven week decline in records going back 32 years. Some of this decline was due to normal year-end tax avoidance by refiners along the gulf coast and last week’s decline was due to the 1.1 million b/d weekly drop in US crude imports due to bad winter weather.
Although inventories of crude at Cushing, Okla. rose by 145,000 barrels to 40.9 million last week, a new pipeline to the Gulf Coast is expected to open shortly with the capability of moving the glut of shale oil that has built up at Cushing to Gulf Coast refineries.  With a $13+ price differential between domestically produced and foreign oil, and expectations that US shale oil production will continue to increase this year, many refiners may be cutting back further on imported crude while US shale oil production continues to grow.
US natural gas and heating oil futures rebounded sharply this week on forecasts that the northern US is about to be hit by a second, but milder, polar vortex. Heating oil prices were helped by Wednesday’s stocks report showing another million barrel drop in US distillate inventories.  A combination of cold weather and increasing exports has sent distillate stocks well below the lower limit of the five-year averages for this time of year.
The Libyans say their oil production has rebounded to 650,000 b/d, three times what it was a couple of weeks ago.  The militias controlling the major oil field which has come back into production are still saying they will shut it down again if their demands are not met shortly.
In South Sudan heavy fighting continues in areas close to the oil fields. There have been sporadic reports of damage to oil production facilities. The number of displaced persons is approaching 500,000 with 80,000 fleeing to neighboring countries and 65,000 inside UN bases. It is hard to see how there is going to be much oil production if this continues much longer.
The Egyptian government says the voters have overwhelming approved the new constitution, paving the way for Army Chief of Staff al-Sisi to run for President. Many see this as a return to military dictatorship and years of political turmoil.
The first part of the interim agreement between Iran and the six powers is being implemented with Tehran agreeing to cut some uranium enrichment in return for the West’s freeing up frozen Iranian oil revenues. The hard part of the negotiations now begin,  and many are skeptical that a real settlement can be reached.