Oil prices have fallen during the last week with New York futures down about $4 a barrel, closing Wednesday at $48.17. London futures, which have been trending downwards since late February, were down by as much as $6 a barrel on Wednesday before recovering to close at $57.54. A stronger dollar, increasing crude stocks, and a weaker Chinese economy were behind the decline.
The weekly stocks report has US crude inventories up by 4.5 million barrels including a 2.3 million barrel increase at Cushing, Okla. This was the ninth straight weekly increase. The debate continues as to how close US storage capacity is to being full and how soon US shale oil production will start to decline. Analysts are all over the board on what is going to happen on the storage capacity issue with some pointing to how much theoretical capacity is left at Cushing and at refineries around the country. Others argue that refinery storage capacity has been sized for the needs of operational swing space and is not available for long-term storage. Cushing is now holding 50 million barrels, which is about 20 million below what the EIA says is its working capacity of 70 million.
US crude imports, delayed by fog on the Gulf Coast last week, were down by 575,000 b/d over the previous week. An accident in the Houston Ship Canal continues to delay imports suggesting that US oil import statistics will be erratic for a couple of weeks.
If production continues to increase and there is a surge in imports, storage capacity could become tight enough to affect oil prices before summer.
The EIA says that US crude production rose by 42,000 b/d last week, but is expected to start slipping in April when it will only be up by 1,000 b/d.
The Brent/WTI spread is being closely watched as US stockpiles grow and troubles in the Middle East continue. The spread was up to $9.37 yesterday, but some are predicting it will hit $15 in the near future.
Much of the international oil news this week has focused on the letter sent by 47 Republican senators to the leaders of Iran warning them not to put their hopes on any agreement like the one that may be concluded with the Obama administration. Where the nuclear negotiations are going should be clearer in the next few weeks as the deadline is only two weeks away.
There have been more attacks on oil installations in Libya keeping pressure on world oil prices.