Prices and production
So far this week oil has bounced between $71 and $75, closing Wednesday at $73.44. The usual expectations of better or worsening economic conditions in the EU, China and the US were the pressures behind the moves. Yesterday, the Euro touched $1.21, the lowest since 2006.
OPEC’s production edged up a bit due to increased output from Iraq. The eleven quota-bound members reduced their output a bit. US crude imports during the last four weeks were a healthy 840,000 b/d higher than last year. US crude inventories continue to grow. US oil production consumption over the last four weeks was up to 19.5 million b/d, 6.9 percent higher than last year.
Around the globe, Indian manufacturing is up for the year including a surge of 16 percent in April. China is reporting that growth in manufacturing is slowing as the government’s steps to control overheating start to take hold. South Korea, the fourth largest importer of crude, increased its imports by 21 percent in May.
The Gulf well blowout continues to dominate the news. BP still struggles to contain the spill before the relief wells are completed a minimum of two months from now. Based on experience with earlier relief wells, some observers are saying it may be many more months before the well is permanently sealed.
Meanwhile the effort to install the LRMP Cap continues along fitfully under the watchful eye of thousands of interested parties as the video feeds from the remotely operated vehicles working on sea floor are now available to anybody connected to the Internet.
So far BP has managed to cut most of the riser loose with giant shears, but is still trying to cut the stub of the riser cleanly off the blowout preventer where it plans in install the capping system. If the capping system works as planned, most of the leaking oil could be piped to surface for disposal within the next few days. But there have been disappointments before.
As the well continues to spew some 12,000-20,000 b/d into the Gulf, the anger level against BP and the federal government for not stopping or cleaning up the oil before it reaches shore continues to grow. The oil which has been moving into the Louisiana bayous for several days is now approaching Mississippi, Alabama, and Florida beaches. There is much concern about the long term effects on the seafood industry. Earlier this week the US Attorney General visited the coastal state to discuss criminal prosecutions of those deemed responsible for the spill.
There clearly will be numerous long-term consequences stemming from this incident, most of which are likely to slow production of deepwater oil in coming years. The US has already begun a six-month review of the causes of the disaster and most countries and companies involved in deepwater drilling will likely feel obliged to follow the recommendations developed by the panel.