So far this week, oil prices in New York and London continued the collapse that has been going on since mid-June. New York futures closed at $91.67, after hitting the lowest intra-day level since May 2013, and London closed at $98.18, the lowest close since April 2013. As has been the case for several months, the markets are seeing too much production and too little demand.  US crude output hit a 28-year high last month and Libya’s National Oil Company is saying that Libyan production is up to 800,000 b/d, despite the turmoil in the cities.
 
The EIA and OPEC have lowered their expectations for global demand growth in 2014 and Saudi Arabia announced that it had cut its production by 400,000 b/d in August due to a drop in exports to Asian markets.

The weekly US stocks report showed little change in refining and imports, but gasoline inventories were up by 2.4 million barrels and distillates stocks were up by 4 million to their highest level in a year. Retail US gasoline prices are down to $3.43 per gallon, the lowest since February.
 
The EIA is now saying that it expects US crude production will climb by 1 million b/d to 9.53 million next year; this would be the most since 1970. The Administration says production in August was 8.6 million b/d, the most since July 1986.  Prices however will be lower, with the EIA estimating that WTI will average $94.67 in 2015, and Brent, which is already below $100, will average $103 next year. The $15 a barrel price drop, which some traders are saying is likely to increase to $20 as prices fall below $85 a barrel, will bring pressures on marginal producers.
 
The EIA released the 2014 edition of its International Energy Outlook this week. The administration is unusually optimistic this year, forecasting that world liquid fuels consumption will increase by 38 percent by 2040. It expects North American shale oil production to continue and be joined by large increases in production by Brazil and Argentina. The report says that in the last two years unplanned outages, mostly in the Middle East, have lowered oil production by 2.7 million b/d with a peak coming last May at 3.5 million b/d.
 
Natural gas prices took a 20 cent per million BTUs’ jump on Monday and Tuesday on forecasts that the heating season may come a bit early this year.  Prices fell on Wednesday after failing to break $4. Supplies of natural gas have been robust this year and a mild summer resulted in weak demand. Stocks are now only 14 percent below the five-year average for this time of year as compared to a 50 percent below normal deficit at the close of the heating season last spring.
 
The Ukrainian and Middle Eastern crises continue apace. In Ukraine, some Russian forces seem to have left the country after blunting Kyiv’s drive to destroy the separatists. The EU has decided on another round of sanctions on Moscow, but is reluctant to announce them as a ceasefire is supposed to be in place.  For now the situation is stalemated, but with the likelihood of negotiations on the rise. There seems to be little threat to the oil trade on the immediate horizon.
 
Washington is hard at work forming a coalition to take on the Islamic State. President Obama has asked Congress for money to support the Syrian rebels and approve whatever actions he deems necessary. Baghdad is making progress in forming a coalition government, but on the ground radical Shiite militia men seem to be slaughtering Sunni civilians and prisoners in the same fashion that IS Sunnis are doing to Shiites. The prospects for a coalition government do not look that good, but with more US involvement, the northern and southern oilfields should be safe from the IS for a while.