- Prices and consumption
- Georgia and the BTC pipeline
For the last week and a half oil prices have remained relatively stable around $114 a barrel. The markets ignored a record jump of 9.4 million barrels in the US commercial crude stockpile and focused on a 6.2 million decline in US gasoline stocks. EIA figures are still showing that US gasoline consumption is down by 1.6 percent over last year based on shipments to wholesalers. MasterCard, however, reports that US gasoline consumption for last week was down by 7.8 percent over last year; yet MasterCard’s four-week moving average, more comparable to the EIA numbers, is only down by 4.8 percent.
Many analysts are starting to say that the summer of 2008 $30 price drop is coming to an end. The EIA is now forecasting that oil prices will trade between $120 and $130 for the rest of the year, barring a major supply interruption. EIA’s analysts note that consumption was relatively weak last fall so that year over year consumption declines in the next few months may be smaller. US gasoline prices are down nearly 40 cents a gallon in the last month and there is a possibility that the Saudis will ease back on recent production increases.
Goldman Sachs’ analysts, however, believe that the fundamental forces leading to higher prices are still intact and that oil will reach $149 a barrel by the end of the year as supply growth will not be able to keep up with increasing demand in China, India, Russia, and the Middle East.
Shipments from Georgia’s Black Sea ports have stopped as Russian troops are blocking the railways and British Petroleum and the Azerbaijan oil company have halted shipments through the pipeline from Azerbaijan to Supsa on the Black Sea until the situation stabilizes. Russian troops are still storming around Georgia either blowing up or hauling back to Russia every last scrap of Georgian military hardware they can find. Despite a stream of protests from the US and the EU, the Russians are taking their time getting out of the country.
BP says that the million b/d BTC pipeline that caught on fire August 5th is undergoing testing and will be back in service by early next week. The Turks are still officially denying that the fire was the result of a bombing by Kurdish separatists.
If all goes well with the pipeline repairs and the Russians pull out of Georgia over the weekend, then exports of Azeri crude could return to normal in the next week or so. While Russia clearly has demonstrated the power to interrupt the flow of oil across Georgia at any time, it is doubtful that they will do so much longer. The million b/d coming from Azerbaijan is too important to the EU’s economy.
Were the Russians to keep the export lines closed much longer, they would risk economic retaliation from outraged European governments.
