Oil prices continued to move higher this week with NY crude closing at $97.94 on Wednesday and London at $114.90. Optimism about the US and Chinese economies coupled with an announcement by the Federal Reserve that it intends to keep buying $85 billion a month worth of securities supported the move. The Fed has now kept interest rates near zero for the last four years and tripled its balance sheet to $3 trillion in efforts to revive the economy. The Fed’s announcement sent the Euro to a 14-month high which normally supports firmer oil prices.
Gasoline futures in New York have climbed by over 40 cents a gallon this week despite increasing crude and gasoline stockpiles in the US and relatively stable gasoline consumption. Much of the problem seems to be centered on New York Harbor where NY futures contacts are delivered and where there have been various kinds of disruptions since superstorm Sandy. Hess Corp. announced this week that it will shut its Port Reading, NJ refinery and sell 19 storage terminals along the east coast.
After a six-session decline that took natural gas futures down some 30 cents per million BTUs, futures rose 2.5 cents on Wednesday to close at $3.28 as traders took profits and reevaluated conflicting weather forecasts for February.
The various Middle East crises continue to simmer. Israel bombed a military convoy in Syria on Wednesday that was supposed to delivering weapons to Hezbollah in Lebanon where they could be used against the Israelis. These weapons could be coming from Syrian stocks, or possibly already owned by Hezbollah, but stored in Syrian where they used to be safer.
In addition to large stocks of chemical weapons, Syria has a variety of modern Russian surface-to-air missiles and long range rockets that are capable of hitting anywhere in Israel. Supply of such weapons to Hezbollah is a “red line” for the Israelis so the attack on Wednesday is seen as a warning to Damascus to stop such transfers, or the Israeli air power might destroy what is left of its military capabilities. Tehran, which recently announced that any attack of Syria is an attack on Iran, has remained silent on the Israeli action.
Russian Prime Minister Medvedev said that Assad’s chances of staying in power are fading as rebel forces continue to make gains against government forces.
Rioting in Egypt continued this week after a state of emergency and curfew were declared in three major cities along the Suez Canal. By Tuesday, the anarchy had grown so bad that Egypt’s top general warned that the country was in danger of collapse unless the government and opposition could come to an agreement.
Another killer smog settled on Beijing this week, prompting Premier Wen Jiabao to call for action to alleviate the situation. So far the proposed solutions are patently inadequate for a country burning some 3.5 billion tons of coal and some 10 million b/d of oil each year.