Monday trading pushed oil prices close to $50 a barrel after a new round of insurgent attacks in Nigeria raised concerns about supply outages.  Tuesday saw prices fall by nearly 5 percent as Brexit worries resurfaced. The rationale for the decline centered on the idea that the EU’s economy would slow, making it more difficult to clear the large surplus of crude in storage. The news that US gasoline consumption was not as high as previously reported and that a US gasoline glut was emerging helped to force prices downwards.
 
This week’s stocks report was delayed to Thursday, but analysts are expecting a 2.5-million-barrel drop in US crude production despite a Genscape report showing a 230,000-barrel build at Cushing, Okla. On Wednesday oil prices rose almost 2 percent on better news about the US economy, leaving Brent at $48.80 at the close and New York at $47.43.  The API survey, which has not been particularly accurate of late, says the US crude inventory dropped by 6.7 million barrels last week sending oil prices down in afterhours trading.
 
The CEO of Vitol, the world’s largest oil trader, says he expects oil prices to remain around $50 a barrel for the remainder of the year.  Analysis of where US oil rigs are coming back into service shows that the new drilling is largely confined to a handful of “sweet spots” where the highest recorded initial production of shale oil has been recorded. This practice is known as “high grading” and if continued could keep downward pressure on oil prices for the next six months, as most new wells will be good producers.
 
Analysts are once again questioning just how big Saudi oil reserves are. They note that after the Saudis took full control of Aramco in 1980, they stopped publishing detailed data and announced that their reserves had climbed from 170 billion to circa 260 billion barrels where they have remained ever since, despite the production of nearly 100 billion barrels of crude in the intervening years.  Last week, the respected consultancy Rystad Energy put the Saudi reserves around 70 to 120 billion barrels. As the Saudis attempt to sell off parts of their oil industry, these questions become more important.
 
On Monday, Tehran announced that its “new” contracts for foreign oil companies investing in Iranian fields would be similar to the “old” pre-sanction contracts. This suggesting that the hardliners have won the struggle over just who “owns” Iran’s oil and that oil companies doing business with Tehran will not be getting much of a deal. This development raises issues as to just how much International oil companies will be investing in Iran in the next few years and how fast the Iranians will be able to grow their production.
 
The announcement this week that the rival Libyan oil companies have agreed to merge has raised the question as to whether the 1 million b/d of potential production which has been shut in for years due to domestic power struggles will soon be coming back into production. The merger announcement is obviously a step in the right direction, but many fear that the rivalries amongst the various tribes and militias are too deep to evolve into an era of working for the common good.
 
Russian oil exports, which rose by 4.9 percent to 5.55 million b/d in the first half of the year, seem on track to set a new record for the year. The bad news, however, is that the floating ruble, which has kept Moscow’s oil industry doing well for the last two years as the weak ruble offset lower oil prices, is leading to economic stagnation. Outside analysts say that the Russian economy is likely to contract again this year despite optimistic talk from President Putin about a return to economic growth.  Still worse for Moscow is the news that it has been burning through its sovereign wealth funds to balance the state budget and that these funds could be empty sometime in 2017.
 

Record heat in the US is draining the natural gas reserves as drillers are refilling the storage caverns this summer at only half the pace seen in 2015. At the current rate of decline, reserves could be below the five-year average by November raising questions as to where natural gas prices are going next winter.