Prices and production
Crude prices climbed from circa $80 a barrel last week to touch a high above $87 on Tuesday. When the Wednesday stocks report showed crude inventories increasing by a larger-than-expected 2 million barrels; imports climbing to a recent high of 9.5 million b/d; and refineries operating at 84.5 percent, the highest since October, the markets took their cue from a weakening Euro and settled back down to close at $85.88. Gasoline inventories fell by 2.5 million barrels last week and the four-week average demand for gasoline is running 1.7 percent above last year. The surge in imports, up by 500,000 b/d over recent averages, suggests to some analysts that refineries were stocking up in anticipation of still higher prices ahead.
There is no sign of a new government in Baghdad, where rather large car bombs continue to go off at regular intervals, suggesting that the hoped for 12 million b/d of Iraqi oil production is still a ways off. Beijing continues to hint that it will let the yuan rise and Tehran continues to announce at regular intervals that harsher UN sanctions, even with Chinese support, will do no good and only hurt the West.
With no significant rain in recent days or in the forecast for the rest of April, the water level at Venezuela’s Guri dam continues to drift down by nearly a meter a week. Daily statistics show that the government has cut back generation at the dam, suggesting that either voluntary conservation efforts are working or more likely that rolling blackouts are getting longer. A major thermal generating plant is now listed as out of service after rumors of a fire over the weekend. Unless this plant comes back on line in the next month or so, it will only compound the problem should the hydro power start to falter. The best guess of experienced reservoir observers is that the summer rains will come in the nick of time to prevent a catastrophe.
Over in southwestern China, there is no end in sight to the six-month-long drought. Some 61 million people and 5 million hectares have been affected, while 25 million people and 11 million farm animals have little or nothing to drink. The Peoples Liberation Army is active in five provinces delivering water. The government continues its reassurances that the drought will have minimal impact on this year’s food production.
China has an extensive array of hydro-generating stations in the region affected by the drought. There are reports that some of these plants are producing way below capacity and may have to close. Other reports mention that hundreds of thousands of extra tons of coal will have to be imported to keep up electricity production if China is to keep growing at 10 percent a year.
This situation suggests that China’s need for energy imports to mitigate the drought conditions may be larger than is generally realized and may be behind the recent price increases.
Eruption in Kyrgzstan
Reports indicate that dozens were killed and hundreds wounded in violent clashes on Wednesday between riot police and demonstrators in Kyrgzstan’s capital, Bishkek. The protests centered around the repressive rule of the country’s president, who later fled the capitol by plane. Apparently the rioting, that could pose a threat to the American air base which supplies NATO operations in nearby Afghanistan, was in large part triggered by a sharp increase in utility rates.