Oil prices in London have risen this week on concerns that the Ukrainian situation will lead to sanctions and reduced oil and gas flows into Europe. The price increase, however, was tempered by the news that China’s economy is not doing as well as Beijing had planned.  In contrast with London, NY oil prices have been relatively flat as lower refinery runs, larger imports and increased domestic production have led to the largest crude inventory along the Gulf Coast since counting began 25 years ago.
Crude prices in NY fell sharply to close at $103.76 after the weekly stocks report showed a 10 million barrel jump in US crude supplies, the largest weekly jump in 13 years.  Some of this increase was clearly due to a nearly million b/d jump in crude imports – likely associated with catching up after the four-day closure of the Houston Ship Channel two weeks ago.  The stocks report also showed modest drops in gasoline and distillate inventories. Stocks at Cushing, Okla. fell by 771,000 barrels last week to the lowest since 2009. The imports and shipments from Cushing resulted in an increase of 5.17 million barrels along the Gulf Coast.
The emerging oil glut is raising the issue of light fracked domestic oil vs. heavy imported oil. As many Gulf refineries are configured to process heavy oil so that refining light oil in these plants is realtively inefficient, calls are increasing to allow the glut of light fracked oil to be exported rather than be refined in the US.
The EIA says that US domestic production increased by 72,000 b/d last week to 8.3 million, but some analysts are growing suspicious of the EIA numbers, noting that when the Texas and North Dakota governments report their monthly production six weeks after the fact, there are large discrepancies between EIA estimates of production what the states reports as actual production.
The Ukrainian situation is clearly the top issue affecting oil prices at the minute. Kiev has started using force against the separatists who have occupied key buildings in several Russian-speaking cities in Ukraine. The swift efficiency with which these occupations are taking place suggests that the occupiers are either Russian troops or have been thoroughly organized by Moscow. The Kremlin is saying that Kiev, by retaking its own government buildings, is starting a civil war and hinting that such a war can only be prevented by an intervention by the 40,000 Russian troops massed on the border.
There is still no clear idea of where all this is going, but oil and natural gas flows into Europe could easily become involved in the confrontation either by western sanctions or retaliation by Moscow.
US gasoline futures have climbed by nearly 20 cents a gallon since early April on lower gasoline inventories and shortages of ethanol for blending.  Natural gas prices have been holding in the vicinity of $4.55 per million BTU’s this week as traders balance forecasts of another 10 days of abnormally cold weather in much of the US against the calendar which shows we are nearly a month into spring.
In the Middle East, fighting continues in Iraq as the elections near and Libya is starting to export some oil from one of the smaller of the four terminals that have been shut down by separatists. There is no clear timetable as yet for resumption of significant amounts of Libyan crude.