Developments this week
Oil has traded around $88-89 a barrel this week with a quick spike on Tuesday to a two-year high of $90.76. Later, a rising dollar and concerns about Beijing raising interest rates brought prices down to a close of $88.28 on Wednesday. The week stocks report showed an increase in refinery utilization resulting in a 3.8 million barrel drop in crude inventories and a bigger than expected increase of 3.8 million barrels of gasoline and 2.2 million barrels of distillates. As crude inventories are usually run down in December for tax purposes, the increase in products was deemed more significant. Gasoline demand in the US was down by 700,000 b/d as compared to the same 4 week period last year while distillate demand is up by 5.3 percent over last year.
Unusually cold weather continues across much of the northern hemisphere increasing the demand for heating oil. China’s largest oil trader reported that it will import 200,000 tons in December which is 67 percent more than the 120,000 tons originally planned. In November, the company imported only 80,000 tons suggesting the diesel shortage continues. The company has also halted all exports after sending abroad 90,000 tons in October and 120,000 tons in December.
Platts reported that OPEC production fell by 70,000 b/d from October to November and that demand continues to grow so that the drawdown of inventories was accelerated last month.
The mainstream media is starting to take note that crude is flirting with $90 a barrel and the average nationwide cost of gasoline is likely to pass $3 shortly. CNN notes that if this keeps on it will “put a serious dent in hopes for economic recovery in 2011.
With government news embargos on the results of militant attacks on oil facilities in place, it is sometimes difficult to get a picture of what is going on. Militant groups are quick to announce whenever they blow something up, but the oil companies are reluctant to confirm damage until they are legally forced to claim force majeure on shipments which they usually attribute to “leaks.” So far this week we have the Niger Delta Liberation Force claiming it blew up a major pipeline Sunday night. Another group says it blew up a pipeline belonging to ENI on Tuesday.
There seems to be more disarray among the Nigerian militants than there was several years ago when they succeeded in shutting in about one third of Nigeria’s exports. Nevertheless blowing up impossible-to-guard pipelines in remote areas is not particularly difficult and Nigeria’s exports already seem to be dropping.
The Nigerian government has filed bribery charges against former US Vice President Cheney for incidents that occurred during the 1990s when he was CEO of Halliburton.