(The Peak Oil Review issued scheduled for Monday, May 9th will be passed by due to the editor’s travel schedule.)
 
Oil prices have dropped this week as the fundamentals of too much production and steadily building inventories overcame the enthusiasm among speculators for higher prices. New York futures closed Wednesday at $43.78 and London at $44.62. London futures have now fallen for four consecutive sessions.  The weekly stocks report showed US crude stocks growing by an unexpected 2.8 million barrels last week and even showed gasoline stocks growing by 500,000 barrels. The increase in gasoline stocks, which are now at their highest in 26 years, was a surprise as gasoline consumption has been much higher this year due to the low price of gasoline. Gasoline prices have been climbing of late and may not be as attractive as two months ago, raising the question as to whether US drivers can be expected to support oil prices this summer.   Total US crude and product stockpiles are now at a record 1.37 billion barrels.
 
This news was enough to overcome the implications of a forest fire that has forced the evacuation of 88,000 residents of Ft McMurray, Alberta, the support center for the tar sands industry. Although production has not been threatened directly by the fire, several facilities have reduced their production due to the evacuation of their staffs. Some 1,600 homes and other buildings have already been burned to the ground. In addition to the Alberta problem, speculators are worried about declines in production of oil in Venezuela, Nigeria, Angola and northern Iraq, which could get worse.
 
Some traders say the recent price rally of 60 percent, which was triggered by talk of a production deal last January, continued for three months largely on its own momentum and with little fundamental support.  Now that a Russia/OPEC deal seems to be off the table, OPEC production is increasing, and US production is not falling all that fast, some are suggesting that lower prices are ahead for a while.
 
US oil imports are now running about 8 million b/d, up 20 percent from this time last year. Some are saying that the rest of the world is simply running out of space to store the excess crude that is being produced, so it is being shipped to the US where some storage space remains, and low prices have resulted in a surge in gasoline consumption. Some say the US theoretically has room for another 100 million barrels of oil, but others are skeptical that the right kind of space is available in the right places.
 
The situation in Iran may be changing. The parliamentary run-off may give the centrist president, Rouhani, a working majority that will enable the enactment of badly needed reforms. While much power remains in the hands of the theocracy and the Revolutionary Guard, oil exports seem to be going well in the wake of the nuclear agreement and some foreign concerns are contemplating doing business with Iran.
 
Attempts by small Chinese refiners to import more cheap oil than they can handle is creating a logistical nightmare that may reduce Chinese imports in coming weeks. Some 83 supertankers with 166 million barrels of oil are headed to China. This is more oil than Chinese port facilities can handle, and the backlog of unloaded ships is growing.
 
Bankruptcies in the US oil and gas industries continue to grow at a fast and furious pace. Some 59 companies have now filed, and more are expected. The numbers may soon pass the dotcom bust of 2002-2003. JP Morgan reported that its non-performing loans jumped by 665 percent in the first quarter from $0.2 to $1.7 billion with most of the bad loans coming from the oil and gas industry. Loans considered to be a problem are now at $21.2 billion.