Prices and production
Oil prices recovered this week from below $70 a barrel last Friday to close at $74.52 on Wednesday. Uncertainty about the Greek bailout, increasing tensions with (and in) Iran, preliminary indications of a major build in US crude stockpiles, and blizzard conditions in the Northeast were some of the factors behind the move.
The EIA is snowed in this week so the weekly stocks report has been delayed until Friday, but analysts are saying us crude stocks grew by 1.5 million barrels and the API puts the figure at 7.2 million. The EIA raised its forecast for global oil consumption in 2010 by 150,000 b/d to 85.3 million b/d. As usual US demand remains weak while Asian demand seems strong.
Western analysts say Dubai’s newly-announced oil discovery is unlikely to amount to anything as the area has been very thoroughly explored during decades past.
The Iranian Situation
The nuclear enrichment standoff took a turn for the worse this week when Tehran announced it was starting to enrich uranium to 20 percent for use in an aging medical isotope reactor. As the Iranians do have the technical ability to fabricate fuel for this reactor, the announcement was widely interpreted as another step towards 90 percent enrichment needed for nuclear weapons.
The Obama administration is talking of stepped-up sanctions against Iran and even the Russians are saying the West’s fears as to Tehran’s intentions are “valid.” Among the major powers Beijing continues to stand alone in calling for patience and diplomacy. Tehran maintains it is ready for a deal on having its uranium enriched outside the country, but Western diplomats deny there is any progress.
Tehran’s domestic troubles are continuing with anti-government demonstrations expected today, the 31st anniversary of the Islamic Republic. Iranian security services have embarked on a new crackdown against the dissidents including the imposition of death sentences. Foreign observers say the opposition must turn out large numbers of protestors or risk being marginalized.
Asia Still Growing
Beijing announced that its exports grew by 21 percent and imports 85 percent (year over year) in January. Economists warn that these figures are meaningless due to the shifting Chinese New Year celebrations and that it will take another month or two to establish what is really happening. In the meantime an official Chinese think tank is predicting that the Chinese economy will grow by 10 percent this year despite government actions to prevent overheating. The Indians say their economy will grow 7.2 percent.
UK Industry Task Force on Peak Oil and Energy Security: 2010 Update
The UK task force’s second report, released Wednesday in London, indicates that the 2008-2009 recession may have delayed peak oil by two years. The report projects world oil production will start dropping by or before 2015. CEOs and chairmen of the task force’s six large companies warn the UK government to act now in order to minimize impacts from possible oil shortages, insecurity of supply and price volatility. Without effective action, the report anticipates destabilized economic, political and social activity within five years.