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Peak Oil Review - a Midweek Update - Feb 4

Price volatility increased this week with oil falling nearly $4 a barrel on Mondayand Tuesday, then reversing to climb by circa $2.40 on Wednesday. New York closed at $32.28 and London at $35.04, still a couple of dollars below the recent highs set late last week. The decline came on more bad economic news out of the China and assurances from every possible source that a grand agreement between Russia and OPEC to cut production was not in the works. This idea only held until Wednesday when Moscow announced that it would meet with OPEC, but not emphasizing the fine print which says that this will only happen after Iran and the Saudis mutually agree to cut production. A 1.6 percent drop in the dollar on Wednesday and an improvement in China’s services sector were other factors contributing to the price surge.
The fundamentals remain lousy for oil prices. The EIA’s weekly stocks report has US crude inventories up by 7.8 million barrels last week. The puts the crude inventory above 500 million barrels which was last seen in 1930 during the depths of the great depression. Crude stocks at Cushing, Okla. were up by 747,000 barrels and US gasoline stocks soared by 5.9 million barrels to 254 million.  Distillate and propane stocks were enough to offset the increase in gasoline stocks, but there has been a lot of cold weather in US of late. Total commercial inventories increased by 9.5 million barrels.
Natural gas prices fell from $2.30 per million BTUs last Friday to touch lows of below $2 on Tuesday and Wednesday.  The decline came on record-high production and stockpiles coupled with weather forecasts saying the temperatures in the US will be close to normal for the time of year during forthe next few weeks.
Bad new from the oil industry continues to flow in as companies either declare bankruptcy or announce major cuts in profits, and future investments. The bad news was capped by a 58 percent drop in profits at Exxon and a drilling budget slump to a 10-year low. The situation was just as bad at BP which reported the worst annual loss in over 20 years and the layoff of 7,000 workers. Offshore vessel and drilling rig owners are considering early scrapping of many of their assets as the decline for their services was down 40 percent last year. 
Even Moscow is talking about selling off state-owned enterprises to foreign investors. However, some are saying that Moscow’s track record of renationalizing its assets when times are better and they are earning substantial revenues should discourage many foreigners from getting involved in Russia, this time around.
Russia’s foreign minister said that Moscow will not stop bombing rebels (and anybody who does not like the Assad government) until all the “terrorists” are defeated. This could take a long, long time. The UN- sponsored peace talks are as yet going nowhere. The Syrian Army, with the help of much Russian bombing, is on the verge of encircling Aleppo which will likely lead to another massive humanitarian crisis.
Secretary of State Kerry is urging the anti-ISIL, US-led coalition to expand it operations to counter the Islamic State in Libya.
Iran cancelled a conference in London to attract more foreign investment into its country. It seems there is a dispute in Tehran over just how good a deal western oil companies should be offered to return to drilling in Iran. 

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