Oil prices underwent a three-day rally beginning last Friday and ending Tuesday, climbing some 19 percent on expectations that world oil supplies would soon start dropping.  Wednesday, however, saw the biggest one-day price drop in two months when prices fell by nearly 9 percent to close at $48.45 in New York and $54.16 in London.  The decline was triggered by an unexpected 6.3 million barrel increase in the US crude inventory, now at its highest since 1930, along with large increases in gasoline and distillate stockpiles.  Total US commercial petroleum stocks increased last week by 12.1 million barrels. The EIA, however, reports that US oil production fell last week by 36,000 b/d to 9.18 million b/d, which at this time of year could be due to bad weather rather than curtailed production. US crude output, however, has topped 9 million b/d every week since October.
 
As refineries typically shut down for maintenance and the switch to producing summer grades of gasoline in February and March, a slower pace of US refining can be expected in the next two months increasing the surplus still further if , as expected, production levels are maintained.
 
Adding to the volatility this week was the first large-scale US oil worker strike in thirty-five years, by the United Steelworkers which represents employees at more that 200 refineries, terminals, and chemical plants.  In order to avoid chaos that would ensue if 60 percent of  US oil processing shut down at once, the strike began at only nine locations, which includes about 10 percent of US refining.  So far management personnel have been able to keep most of the facilities in operation. The union is asking for higher pay and benefits as well as better safety standards. OHSA is monitoring the struck facilities to ensure that safety standards are being maintained during the strike.
 
US natural gas continues to trade around $2.70 per million BTUs amidst relatively mild weather and increasing natural gas supplies.
 
Heavy fighting continues in the Ukraine with the Russian-backed rebels making progress against government forces. Washington is said to be considering supplying military support for Kyiv.
 
The situation continues to deteriorate in Libya as well as in Iraq/Syria where brutality on both sides is reaching new levels. Iraq’s oil exports fell 14 percent in January from December’s record levels due to bad weather, technical problems and disagreements with the Kurds.