Developments this week
Oil traded around $82.50 a barrel on Monday and Tuesday. On Wednesday it fell below $81 for a while after the API forecast a 6.4 million barrel increase in US oil stocks and the dollar rose on the prospects for more quantitative easing by the US Federal Reserve. Later when the US stocks report showed a 4.4 million barrel drop in gasoline inventories and a 1.6 million barrel drop in distillates inventories resulting in a total commercial petroleum inventory decline of only 600,000 barrels, the oil market rebounded to close at $81.94. Oil traders are saying the prices are stuck in the $80–85 range until there is substantive economic or supply/demand news.
Distillate inventories in the US have now dropped for 5 weeks and are at their lowest level since last July. Demand for distillates in October was up 8.7 percent over last year. Significantly increased exports is thought to be a major reason for increased demand. Heating oil prices have doubled since touching a three-year low of $1.12 in March. Gasoline sales in the US are not doing so well. MasterCard reports that gasoline consumption, which has been falling in recent weeks, is down to 9.1 million b/d, a 2.7 percent decline from last year.
Several major oil companies have made application to renew drilling in the Gulf but remain concerned about how long it will be before they receive drilling permits.
The strike situation in France is calmer at the minute. Some refinery workers have returned to their jobs but the major seaports remain closed so there is little crude to process. Police have opened access to the country’s strategic gasoline reserve depots and coupled with greatly increased imports from other countries most filling stations are open again. The unions have called for renewed demonstrations, against changes in the pension law for today. Observers believe that the success of these demonstrations will determine the course of the strike.
The political and oil production situations in Iraq show no signs of improving. There is still no new government. The political bloc headed by former Prime Minister Allawi, which won the most parliamentary seats in last spring’s election, says it opposes the recent auction of gas blocs to outside companies. The bloc warned that all the new oil contracts that have been signed in recent months will be canceled once a new government is formed. The provincial government of Sunni-dominated Anbar province is saying there is no way foreign companies will be allowed to drill in the province without agreeing to local demands.
Alaska
The US Geological Survey has sharply reduced its estimate of undiscovered oil in the National Petroleum Reserve–Alaska on Alaska’s Central North Slope. The new estimate, released Tuesday, is 896 million barrels of oil, a drop of more than 90 percent from the 2002 estimate of 10.6 billion barrels. Recent exploratory drilling has revealed natural gas rather than oil in much of the region. 3D seismic surveys and the drilling of more than 30 exploratory wells provided new geologic information for the revised estimate.
