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Peak oil notes - August 28

Oil prices have been quiet this week trading around the Wednesday close of $93.88 in New York and $102.72 in London.  The markets continue to ignore geopolitical problems in the Middle East and Ukraine to focus on increasing US shale oil production and weak global demand. Some analysts are predicting that NY oil prices will sag into the mid-$80s before the end of the year.  The weekly stocks report showed refining staying relatively high for this time of year; crude stocks falling by 2.1 million barrels; gasoline stocks falling by 960,000; and distillate stocks increasing by 1.3 million barrels.  About the only point of note in the report was that stocks at Cushing, Okla. rose by 500,000 barrels some of which could be attributed to a local refinery closure. Others note that Cushing has been operating at close to the minimum needed necessary to fulfill NYEX delivery requirements so that for refiners to move much more oil out of Cushing would only lead to unnecessary delivery problems.
The lowest crude prices seen since last January have US retail gasoline prices down to $3.48 according to the Lundberg survey and $3.43 according to the AAA.
Natural gas prices have continued to inch up slowly for the last week or so on forecasts of warmer weather in the US for the next couple of weeks. Futures closed on Wednesday at $3.97 per million BTU’s which is nearly 20 cents higher than natural gas was trading early last week.
No particular threats to oil exports emerged from the various Middle East and Ukrainian crises last week.  The situation is Libya is so bad that it seems they were being bombed by the UAE of all places. Islamist militias have taken over Tripoli and its airport while two competing governments argue about who is in charge. Despite the total chaos, the Libya oil company continues to announce the reopening of ports and oil fields, but it difficult to see where more than an occasional tanker is picking up crude. Most observers are forecasting that the country is falling into a prolonged period of civil war. Concerns are increasing among Libya’s neighbors that the country will become a sanctuary for radical Jihadists.
The IS has had a good week, capturing a major Syrian airbase in northeastern Syria and holding its own against US-supported Kurdish counterattacks. The US has begun reconnaissance flights over Syria in preparation for possible bombing strikes against IS forces. Everybody from the US to Iran are busy arming the Kurds who are seen as the only indigenous force capable of defeating the IS when properly armed. The US is busy organizing a coalition to fight the IS who insist they are growing stronger every day and will one day be planting an Islamic flag in the White House.  Given the forces aligning against the IS, they are likely to be too busy in the immediate future to threaten oil facilities in Kurdistan and southern Iraq. The IS seems to have been beaten back after making yet another attempt to capture Iraq’s largest refinery at Baija.
In other news, Royal Dutch Shell is calling it a day in Nigeria and is offering its oil producing properties there to local investors. Shell has been plagued by incessant attacks on its oil pipelines for years and seems to have had enough.
The civil war in Ukraine is heating up with accusations of Russian tank columns moving into the country to block the defeat of the insurgents. Active duty Russian military personnel have been captured inside Ukraine.  However, there is still no impact on oil and gas shipments outside of Russia’s blockage of natural gas to Ukraine.
President Obama is pushing for a “climate accord” rather than a treaty to stem the growth of greenhouse gases. A treaty would require approval of the Senate which would be unlikely in the event the Republicans take over the chamber in November.

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