Crude prices continued to fall this week as markets ignored the new sanctions on Russia and the increasing turmoil in the Middle East to focus on sagging gasoline demand and increasing product stocks. At the close Wednesday, New York oil was down to $100.27 after trading above $103 late last week and London was down about $1.50 this week closing at $106.51.
The weekly stocks report continued to show high levels of refining which resulted in a 3.7 million barrel decline in crude stocks and an increase of 365,000 barrels in gasoline and 789,000 barrels in distillate inventories.  Inventories at Cushing, Okla. dropped by 924,000 barrels last week to a six-year low.  Most of the decline is showing up as increased inventory along the Gulf Coast as the new pipeline capacity to the Gulf has allowed refiners to transfer oil closer to their refineries. Concerns continue about Cushing having enough oil on site to cover deliveries on futures contracts with crude that is within WTI specifications. The EIA says that US crude production fell by 122,000 b/d last week to 8.44 million b/d.  Some analysts believe that EIA estimates of the pace that US crude production has been increasing have gotten ahead of reality so that the reported drop in production, which seems unlikely in July, may be an effort to realign production estimates with actual output.
Overseas, chaos affecting oil exports continues.  In Libya, fighting continues at the Tripoli airport and in Benghazi. Despite the hype about the resumption of Libyan oil exports several weeks back, it turns out that nothing has been shipped from Libya’s two biggest oil export terminals that are supposedly open. Given that numerous embassy staffs and many foreigners are fleeing the country, the prospects for increased Libyan oil exports in the near future not seem good.
The situation in Gaza continues to decay with bombs falling and rockets firing.  Both sides seem to be digging in for an extended conflict; however the humanitarian situation is Gaza is collapsing with little electricity, food, water or medicine available for the population.  Most of the casualties continue to be Palestinian civilians. Iran has called on all Muslims to help arm Hamas to fight the Israelis and is talking about increasing the flow of missiles to Israel’s enemies in Lebanon, Syria, the West Bank and Gaza. For now the Gaza situation has little to do with oil exports, but as animosities increase, that could change.
The US and EU have announced new sanctions on Russia for its role in the Ukrainian situation and the downing of the Malaysian air liner.  This time the sanctions are more serious and are aimed at slowing Moscow’s ability to tap its oil reserves in the future, rather than affecting current production and sales — which would have an adverse impact on Russia’s oil and gas customers.  Hampering long range projects by denying loans and forbidding western help in drilling in the Arctic, it is hoped, will cause Moscow economic grief in coming years. There is evidence that Russian businessmen are becoming increasingly concerned about the course of events as much of the world cracks down on Russia’s economy for its denial of involvement in the airplane shoot down. While the Soviet Union was relatively immune to Western economic pressures, this is not true with Russia which is heavily dependent on Western capital and technology.  However, according to recent polls, most Russians, who are having a fit of nationalistic fervor, are still happy with President Putin’s actions.