Prices and production
After dropping on Monday, oil prices rebounded sharply on Tuesday and closed at $82.92 on Wednesday. Some technical analysts believe oil prices are at a critical juncture. If oil breaks through $83 a barrel and then the recent high of $85 set last January, the analysts would expect to see oil prices continue on up into the $90s shortly. Wholesale gasoline in New York closed at $2.31 a gallon, the highest it has been since the price spike in 2008.

This week’s stocks report showed total U.S. commercial petroleum inventories dropping by 2.5 million barrels and total fuel demand dropping by 4.4 percent last week to 18.8 million b/d. Last week crude imports fell to 8.3 million b/d, their lowest level for the second week in March since 2002. Some analysts noted that with so much crude being redirected to Asia from the Middle East and Africa, it may become increasingly difficult to maintain US crude imports, especially if demand increases.

OPEC agreed for the 5th time since late 2008 to keep its production levels unchanged at the meeting on Wednesday. OPEC members said they were happy with current prices. Some observers noted that the cartel would be even happier with $90 oil but some members noted that still higher prices would stifle demand.

The Venezuelan power crisis continues to make news with the government now working on plans to insure that food will continue to be delivered if the Guri hydropower station runs dry. Venezuela’s Oil Minister continues to reassure everyone that there will always be sufficient power keep oil production running. In the meantime President Chavez announced that in May Venezuela will start shipping 80,000 b/d to his good friends in Belarus. There is another 80,000 b/d that won’t be coming to the US – lets hope the Belarusians can refine the stuff.

Iran announced that it will need a $200 billion investment in oil, gas, and refining over the next five years to prevent a decline in production. The Oil Minister said that if foreign countries won’t help, “we Iranians can do it ourselves.”

China
The World Bank has raised its growth forecast for China this year to 9.5 percent from the 8.7 percent it had forecast in November. The bank also expects that growth will fall to 8.7 percent in 2012. While expressing some concern about inflation, the housing bubble, and local government finances, the bank said that all these problems are manageable and that it does not expect serious economic difficulties.

The war of words between Washington and Beijing over revaluing the renminbi continues. Many in the US feel that the current peg of 6.8 renminbi to the dollar gives China an unfair advantage in exporting its goods. If China allows its currency to appreciate against the dollar, it would hurt exports, but would also make imports of oil and other commodities which are denominated in dollars cheaper for Chinese customers.