Oil prices surged Wednesday on yet another round of expectations that there will be a production freeze by those oil exporters that in fact have little hope of increasing production soon. After two months of price increases totaling some 47 percent, many traders are convinced that oil prices have reached a bottom and there is nowhere to go but up. These traders have seized on the meaningless idea that a meeting next month of exporters will eventually lead to some sort of production cut forcing up oil prices. Tehran continues to say loud and clear that it intends to increase production by another 900,000 b/d until it reaches it the pre-sanctions output of 4 million b/d before it will consider any freeze. Iran increased its oil production by 187,000 b/d in February. Moscow says it understands Tehran’s position and that the Iranians can keep increasing production until their goals are met.
We have not heard from Baghdad on the subject recently, but now that the Kurds’ export pipeline to Turkey is back in service, the Iraqi/Kurd exports should be increasing too. Oil prices in New York were up 5.8 percent on Wednesday to $38.46 a barrel. Brent closed at 40.33 a barrel.
The weekly stocks’ report showed the US crude inventory growing by 1.3 million barrels last week. Gasoline stocks were down by 700,000 barrels and total US crude and oil product inventory was up by 1.8 million barrels. Earlier it was reported that stocks at Cushing, Okla. were at close to 90 percent of capacity, a number that has many analysts concerned about another down leg for oil prices.
An oil leak in Nigeria and pipeline sabotage in Turkey had global exports down by 800,000 b/d last week. The problem in Turkey is over, but the likely duration of the Nigerian outage has not been announced.
Washington and Ottawa announced new initiatives this week to protect the environment by imposing more regulations on drilling in Arctic waters and the Obama administration reversed its position and eliminated plans to auction off 104 million acres for drilling off the eastern US coast.
In a surprise move, Moscow announced that it was withdrawing “the main part” of its military forces from Syria as their “overall mission” has been completed. Nobody is sure what this means for relations between Moscow and Damascus, but Moscow may be signaling the Assad government that its recent talk about recapturing all of Syria is a non-starter.
The Russian intervention clearly increased the longevity of the Assad government which was in danger of being overrun by rebel forces before the arrival of the Russians who concentrated on destroying the main threats to the government. If Russians airstrikes are significantly reduced or stopped, it seems that the rebel forces who still enjoy considerable Arab and Western support could go on the offensive again. The Kurds at the Geneva peace talks have called for a federal Syria with a semi-autonomous Kurdish region in the north. This of course in a non-starter with Syria and Turkey.
Fears are growing that the first bankruptcies among major US oil and gas producers are in the offing. Three companies announced that they missed interest payments in February and have entered a one-month grace period. If they cannot work out their problems in this period, they will be forced to declare bankruptcy.