Developments this week
Oil prices moved higher this week as fighting intensified in Libya and political protests spread further in the Middle East. In NY crude futures closed at $105.75 a barrel, the highest since September 2008. In London Brent crude closed at $115.54. The EIA reported that US gasoline stocks fell by 5.3 million barrels the week before last — the lowest in two years. This news contributed to NY gasoline futures climbing to a close of $3.02 a gallon after falling below 2.80 in trading last week.
Large protest demonstrations are taking place in Yemen, Bahrain, and Syria this week with government forces firing on demonstrators. Although no oil exports other than those from Libya appear to be threatened at the minute, an increase in ferment across the region has the oil markets worried.
Coalition forces are stepping up air strikes to relieve pressure on insurgent forces besieged by Gadhafi’s troops in Misrata, Ajdabiya, and Zawiyah. As the fighting intensifies, and government forces are forced to pull back by coalition airstrikes, fears are increasing that withdrawing government troops might inflict significant damage on the country’s oil infrastructure to keep it from falling into insurgent hands. Many observers are coming around to the view that Libya’s oil exports will be shut-in for many months and perhaps even years.
Analysis of China’s oil demand in February shows that it climbed by 10.1 percent year on year to 9.6 million b/d, the second highest level ever. As Beijing does not publish demand information, foreign observers are forced to calculate a figure from import and refining information. The president of Saudi Aramco said that increasing Chinese demand for oil is not a factor in increasing prices as drops in OECD demand are offsetting increases in Chinese consumption.
The Iraqi oil minister opined that oil prices will only reach $120 a barrel in the immediate future, a level which OPEC believes will not harm global economic growth.
A British oil company announced Monday that it has discovered commercially viable deposits of oil and natural gas off the Falklands. Another British oil company abandoned exploration in the area after failing to find oil last year. The announcement is bound to exacerbate UK-Argentine relations as they both claim the Falklands and surrounding waters.