Prices and production
The nearly $20 a barrel plunge in oil prices which began in early May continued this week with oil touching $67.90 before rebounding to close at $69.90. Most of the fall was attributed to the steadily falling Euro which touched a low of $1.214 on Wednesday, the lowest since April 2006. Even a near-trillion dollar IMF bailout of Greece has not been enough to stem concerns about future economic conditions in Europe.

For now, the falling Euro and concerns about economic growth are overshadowing oil market fundamentals. This weeks EIA report showed a small growth in total crude stocks of 294,000 barrels but the stockpile at Cushing (OK) climbed by to 917,000 barrels to a record 37.9 million. Gasoline inventories fell by a much smaller-than-forecast 294,000 barrels, suggesting that US demand is not picking up much as the summer driving season opens.

Deepwater Horizon
There has been little news on efforts to cap the well so far this week. BP says it is still siphoning off about 2000 b/d out of a flow that could be as little as 5,000 b/d or as much as the theoretical maximum of 55,000 b/d. For now efforts are focusing on blasting assorted plugs and drilling mud into the blowout preventer in hopes that this will choke off the flow. If this does not work, the smaller containment dome, “top hat” is still on the bottom waiting to be moved into place. The last resort will be the two pressure relief wells that are currently being drilled at the site. These wells, however, will take another 2-3 months to complete, provided drilling is not interrupted by the upcoming hurricane season.

Oil from the leaking well is reported to have reached the loop current where it could be swept past the Florida Keys and up the Atlantic coast. So far the Coast Guard is saying that by the time the oil has traveled that far it is likely to be “weathered” and diluted to the point where it will not cause serious damage.

Much to the vexation of the oil industry an administration ban on new offshore drilling remains in place, resulting in several major projects already being placed on hold. The question of just when the drilling ban will be lifted and more importantly what the requirements for new wells will be, remains a key issue for the future of offshore oil production in the years ahead.

Iranian Nuclear Fuel
On Monday, Tehran agreed to a deal brokered by Brazil and Turkey to ship 1200 kilos of its low-enriched uranium to Turkey in return for 120 kilos of 20 percent enriched fuel rods that could be used only in research reactors. The US, Europe, and Russia responded with skepticism about the deal which seems timed to forestall sanctions. The deal is similar to one that was proposed last October and fell apart when Iran backtracked and refused to participate. In recent months, Tehran is believed to have enriched enough uranium that even if it ships off 1200 kilos it would still have enough left to continue work on a nuclear weapon.

The day after the deal was announced, the US introduced a new package of sanctions at the UN Security council. The US resolution is said to have the support of the five permanent members of the Council – including China.