So far this week, oil has hovered around $65 dollars a barrel with very little news to move prices in either direction. The equity markets have been steady despite generally falling corporate earnings which, when they beat Wall Street estimates, are being interpreted as signs of economic recovery. The weekly stocks report showed US crude falling by 1.8 million barrels largely due to lower imports on the West coast. Gasoline, distillate, and propane stocks all increased, leaving the total US commercial inventories 1.9 million barrels higher for the week. As usual, distillate and jet fuel demand are down by 11 and nearly 14 percent respectively. Gasoline consumption over the last four-week period was up by 0.7 percent over last year, but then again gas prices are down by $1.60 a gallon as compared with July 2008.
Nigeria’s petroleum minister noted that the country’s production was down to 1.4 million b/d vs. a planned 2.2 million. Shell announced that it was resuming 65,000-70,000 b/d of production from a 115,000 b/d shallow offshore field that was shut down by militant attacks three years ago. Despite the current ceasefire, the militants promptly announced that they will attack the field again if production is restored.
Premier Wen announced that Beijing is going to use its $2.1 trillion in foreign exchange reserves to buy foreign assets. This is the first time that China has officially announced that it is government policy to directly support its large state-owned corporations by purchasing offshore assets.
China’s purchase of non-financial assets reached $40.7 billion last year, up from $143 million in 2002. Oil and other natural resource assets are expected to be at the top of Beijing’s shopping list.
The move is in response to China’s concerns over the possibility that US deficits will eventually lead to devaluation of the US dollar.