Oil prices fell on Monday and Tuesday this week on expectations that US crude stocks will continue to grow. They rebounded sharply on Wednesday, however, after the Saudi petroleum minister told reporters that the oil markets are now calm and that demand is growing. This coupled with a modest improvement in China’s economic situation in February was enough to overcome an 8.4 million barrel jump in US crude stocks to 434 million barrels. At the close Wednesday, New York futures were up 3.5 percent to $50.99 and London was up 5.1 percent to $61.37. Conventional wisdom is saying that the rapid drop in oil prices in over and that WTI will trade in the vicinity of $50 a barrel and London around $60 until falling production later this year sparks production.
 
In addition to the unexpectedly large jump in the US crude inventory, the weekly US stocks report also showed that stocks of distillates, gasoline, and propane fell last week. Some of this was clearly due to extremely cold weather across parts of the US. The report also showed no increase in US crude production in the lower 48 last week, which also was likely due to the colder weather.
 
The US oil worker strike, which began on February 1st and so far has involved 12 refineries totaling about 20 percent of US refining, continues. The last such strike in 1980 lasted for three months. So far the strike has had minimal impact on refinery operations, as management personnel have been able to keep most installations running. The union and Shell oil agreed to reopen talks later this week.
 
US natural gas prices have remained stable around $2.90 per million despite the very cold weather as the markets believe there will be more than adequate supplies for the remainder of the heating season.
 
President Obama vetoed the Keystone pipeline bill which the new Congress had passed as one of it highest priorities. Oil industry publications are already saying that the veto signals that the President will reject the project after the State Department study is completed.
 
Overseas, Libya’s largest oilfield, which just opened on Sunday after its pipeline to the coast was bombed, was closed again on Tuesday after heavy rain caused a power outage.
 
Another round of the Iranian nuclear negotiations concluded this week with officials saying some progress has been made. The posturing and threats from Tehran continue as the negotiations are coming to an end. The real issue will come after any agreement is signed when those opposed to an agreement on both sides do their best to undercut its implementation.
 
The ceasefire in the Ukraine seems to be holding a little better, but Gazprom is once again threatening to cut off all natural gas supplies to Kyiv.