New York oil futures took a jump on Wednesday after the EIA reported that US crude inventories fell by an unexpected 4.3 million barrels last week as US refinery operations increased slightly and crude imports fell by 1.2 million b/d. WTI climbed $1.24 to end the session Wednesday at $92.80 while, in London, Brent futures were only up by 10 cents a barrel to close at $96.95. This brings the WTI/Brent spread down to $4.15.
 
The price jump in NY is not expected to last as most are saying that prices will fall further due to increasing US production and weak demand in China and the EU. A Libyan official claimed this week that his country’s oil production is now up to 900,000 b/d, but such claims are highly suspect given the turmoil in the country. The EIA says that US crude production climbed to 8.87 million b/d last week, but this is a projection and some analysts are starting to say that the EIA ,ay be getting a little ahead of reality. A private oil forecaster, Bentek Energy — a unit of Platts, says that production of shale oil from the Bakken hit 1.2 million b/d in August and that production in the Bakken and Eagle Ford increased by 78,000 b/d during the month.
 
Price pessimism is gripping the industry however. Citigroup lowered its 2015 forecast for US oil prices by $10 per barrel to $89.50 and cut the forecast for Brent by $7 to $97.50. The Iranians are even more pessimistic saying that Brent will be trading around $90 a barrel next year.
 
Most of the week’s news has centered on the climate summit at the UN and the upswing in violence across the Middle East. The Islamic State is on the move against Kurdish villages in northern Syria driving 150,000 Kurds into Turkey and the US with a few allies has started bombing the IS and kindred spirits across northern Syria.  The world seems resigned to a prolonged war in the Levant with no clear pathway to an ending. So far there does not seem much of a direct threat to oil production from the IS’s various offensives and with direct intervention by the US and numerous allies, a direct assault on the southern Iraqi oilfields does not seem likely at the minute. 
 
US warplanes bombed oil storage facilities in northern Syria this week in an effort to shut off the money the organization has been making with its oil sales in the region. Without a reliable source of motor fuel the IS will have considerable trouble in conducting conventional warfare in the region which requires the movement of men and supplies by motorized vehicle.
 
Production in Iraq during the next few years is unlikely to grow as much as expected and could even decline as the massive water injection project which is vital to increasing production is having trouble getting off the ground. The general turmoil north of Baghdad is sure to divide the government’s attention and the Sunni-Shiite conflict is just getting warmed up.
 
There has been little news about the Ukraine this week. Exxon seems to be closing down its well in the Russian arctic in response to the sanctions and concerns are rising about how Ukraine will get along without Russian natural gas next winter. While most Russians were delighted that President Putin was able to “return” Crimea to its “rightful” place as part of Russia, the economic costs of this adventure are only starting to come. The ruble is down, foreign capital is fleeing the country, western bank loans are no longer available and the country is entering a period of economic recession or worse.