Developments this week
In London, Brent crude has moved up $3 a barrel so far this week, closing on Wednesday at $114.61. Brent is now only $3-4 a barrel below where it was trading in June and July before the early August sell off. In NY, gasoline futures continue to rise and are now within a few cents a gallon of the July trading range. West Texas Intermediate has been climbing more slowly and is now about $10 a barrel below July highs.
A chorus of voices is saying the NYMEX West Texas Intermediate contract is no longer reflective of the global price of oil and certainly is not reflective of what refiners along the US coasts are paying for their crude. The NY contract, beset with an oil glut in Oklahoma, confusion as to inventory numbers amidst the release of 30 million barrels from the US strategic reserve, and an endless stream of conflicting reports about the outlook for the US economy, is back to trading some $26 below the London prices. With average US gasoline prices only some 9 cents below where they were last month and nearly a dollar a gallon higher than this time last year, the American consumer and the economy as a whole are seeing very little relief from lower oil prices.
The EIA reported an increase of 5.3 million barrels in US crude stocks, but given hurricane conditions along much of the east coast which slowed refining, and disrupted normal import patterns – crude imports were 800,000 b/d higher as tankers rushed to unload and get away – and the continuing releases from US strategic stockpiles, this number does not mean much.
Of more interest is the EIA report that US fuel consumption last week was 19.6 million b/d, up by 1.7 percent over the preceding week.
A Bloomberg survey says OPEC production was up by 0.3 percent in August to 30.03 million b/d.
At the minute there are new tropical disturbances in the Gulf and Atlantic that could threaten something if they get going.
The EU is close to boycotting Syria’s 130,000 b/d of oil exports which provides about a third of the government’s income.
Exxon, Moscow and the Arctic
The surprise of the week so far was the announcement that Exxon has signed an agreement with Moscow to explore for oil in Russia’s arctic waters. The agreement seems to supersede a similar agreement between BP and Rosneft which fell through earlier this year. As part of the deal Exxon will let the Russians develop US deepwater deposits in the Gulf and shale deposits. The terms of the Exxon deal were said to be considerably better than those offered by BP which had its Moscow offices raided as part of a lawsuit over the collapsed deal.,