Oil futures fell to a four week low in after hours trading on Wednesday after the API announced their weekly survey shows that US crude stocks grew by 4 million barrels last week along with a 2 million barrel increase in gasoline and a 3 million barrel increase in distillates. Analysts surveyed by the wire services, however, are expecting a 400,000 barrel drop in crude stocks and similar declines in gasoline and distillate inventories. The IEA’s official survey is due out on Thursday this week because of the holiday.
Expectations of lower economic growth in China, weak demand in the US, rising supplies, a possible reduction in the Federal Reserve debt purchases, and recession in the EU are all contributing to the weakness in oil prices. Some analysts are expecting to see Brent crude down around $90 a barrel in the next few months. Little change in OPEC`s production is expected at its meeting this week.
As turmoil increases in the Middle East, there is remarkably little discussion of its possible impact on oil exports among traders and analysts who seem to be expecting that exports, particularly from Iraq, will continue to grow in the coming years.
The fighting in Syria is becoming more intense with the entrance of organized Hezbollah units into the government’s current offensive. There are more reports of chemical weapons being used by government forces. The “peace conference” in Geneva which is being pushed by the US and Russia seems to be going nowhere as Assad won`t leave and the insurgents only want to talk about his resignation. The EU and US seem to be serious about supplying arms to some rebel militias if the talks do not take place. Moscow is sending, or possibly just threatening to send, its advanced S-300 surface to air missile system to Syria in retaliation for Israeli air attacks.
A backlash in Lebanon is taking place with Sunnis retaliating against Shiites in Lebanon. Hezbollah`s supporters there seem content with the idea that it all right to attack Sunni Muslims in Syria instead of Israelis as the Sunni insurgents are really acting for Israel and the West. All this suggests that the Syrian uprising is rapidly spreading into Lebanon.
It has been a bad week in Iraq with more than 70 killed in a wave of bombings around Baghdad. Tensions between Iraqi Shiites and Sunnis are at the worst since the US pulled out, but most observers do not expect a full scale civil war to erupt in the near future.
Iran’s presidential election is in full swing. As anyone resembling a moderate has been banned from the ballot by the Guardian Council, only hardliners are left running for office. The current favorite is Saeed Jalili, who is vehemently anti-West, Tehran’s unyielding nuclear negotiator, and a protégé of supreme leader Ayatollah Ali Khamenei. On the face of it we should probably not expect much in the way of compromise after the election, but with problems mounting and a new President firmly in control, there could be room for movement.
China’s new Premier Li Keqiang has been telling the Germans that his country faces huge challenges as its growth level slows. China is still expected to increase its oil consumption by some 450,000 b/d this year.
