Peak oil review (mid-week update)

Oil prices continued to slide this week with New York futures closing Wednesday at $53.27 and London at $57.33.  At one point on Wednesday NY futures touched $52.51 and London $55.81 before rebounding at the close.  There was no particular news leading to the decline other than the continuing perception that there is too much oil chasing too little demand.  OPEC’s production is thought to have dropped about 100,000 b/d in December, but is still 250,000 b/d above the cartel’s self-imposed limit of 30 million b/d.  The hedge funds are reducing their recent bets that oil prices will start climbing in the near future and general sentiment among traders is for still lower prices ahead. Even Goldman Sachs said it expects a “far lower” new normal for prices.
 
The EIA’s weekly report has US crude prduction incrasing to 9.14 million b/d; however there is reason to suspect that some of EIA’s current production numbers may be optimistic.  The report showed US refineries running at at a record pace, producing 10.2 million b/d of gasoline last week. It also showed US crude stocks falling by 1.8 million barrels last week; however this was offset by a 3 million barrel gain in gasoline and a 1.9 million barrel increase in distillate stocks.  Stocks at Cushing, Okla, increased by 2 million barrels to 30.8 million.
 
Natural gas futures also dropped sharply this week, closing Wednesday at $2.88 per milllion BTUs. This is the lowest year-end close since 2001. Mild summer and fall weather coupled with record production are responsible for the drop. Forecasts for January 2015 say that temperatures in the US will be 7 percent warmer than last year suggesting that the prices will continue to be weak. This week’s natural gas inventory report showed a withdrawal of only 26 billion cubic ft vs. an expected 30-34 billion.
 
The impacts of the rapidly falling prices continue to be felt across the world. US gasoline prices are now averaging about $2.27 for regular, and some are saying that US drivers could save $75 billion on their gasoline bills in 2015.  Moscow announced that its economy suffered the first major contraction since 2009 and the ruble fell sharply again on Wednesday dropping to 60 to the dollar from 56 earlier in the week.
 
The fires at Libya’s El Sidra export terminal are still burning and the National Oil Company has contracted with a US firm to help put them out.  The country is thought to still be producing some 300,000 b/d from offshore oilields and those connected to the eastern terminal at Hariga. It is uncertain if any of the current production is being exported or if it is all going to domestic consumption. The civil war conrtinues with a suicide car bomb detonating outside of the hotel in Tobruk where the official Libyan parliament is meeting. Until now, Tobruk, which is at the eastern end of the country close to the Egyptian border, has been relatively immune to the violence.
 
In Iraq, leaders of the southern Basra region have lauched a campaign for semi-autonomy from Baghdad, much as the Kurds have now.  Baghdad is obviously less than enthused as the capital woul be left without control of the oil from either end of the country.