Prices and production
Crude jumped $2.27 a barrel on Wednesday to close at $76.67 after the EIA reported an unexpectedly large drop of 4.8 million barrels in crude stocks last week. Stockpiles of gasoline and distillates also fell as cold weather increased demand. Some analysts believe oil is on course to rise on into the $80s after New Year’s while other see the jump as technical – thin markets during the holidays and tax avoidance. Unusually low crude imports of 7.7 million b/d and lower refinery utilization last week was also responsible for the decline in stocks.
US gasoline consumption last week was up by 1 percent from the prior week and 2 percent from the same week last December. Cold weather across the northeast led to a distillate consumption of 4 million barrels, the highest since last April. Total commercial inventories fell by 14.2 million barrels.
OPEC decided to hold production steady at the Luanda meeting. Although there was some muttering about adherence to quotas, with prices holding above $70 a barrel, the Saudis, who are bearing most the brunt of the quota, did not seem overly concerned.
Iraq’s northern export pipeline has yet again been shut down by sabotage. Demands from Nigerian rebels are cranking back up; coincidentally or not, Shell plans to sell its onshore Nigerian holdings that include up to 100 million barrels of proved reserves.
Beijing and Caracas signed a new agreement this week under which the Chinese will develop a block in the Orinoco heavy crude belt. Venezuela wants to increase its exports to China to 1 million b/d from what it claims is a current 400,000 b/d. The Chinese are also moving to secure access to a second Orinoco block and are planning to build a new refinery in Venezuela.
Faced with a serious drought and shortfalls in hydroelectric power, Venezuela has ordered a 20 percent reduction in electricity consumption across the country.
This week saw more anti-government demonstrations that may have involved hundreds of thousands of protestors. In the meantime the government continues to reject western offers aimed at settling the nuclear dispute. Predictions that the situation will continue to deteriorate in 2010 abound.