Developments this week
It has been a quiet week with oil prices retreating a bit on Monday and Tuesday after nearly a month of steady increases. On Wednesday prices rebounded on better US economic news leaving NY oil down about $3 a barrel off last week’s highs, closing at $107, and London down about $2 from recent highs to a $122 settlement.
As the Iranian confrontation has been rather quiet this week, traders turned their attention to the never-ending European debt situation and fears that the recent run-up in oil prices will slow global economic growth. Most of the reporting on the Iran confrontation this week has been concerned with Iran’s oil customers scrambling around to line up other sources of oil or avoid the financial sanctions.
Although the EU made some large loans to help its troubled banks this week, the rest of the news is that sentiment seems to be building against the seemingly endless bailouts.
The weekly US stocks report showed the crude inventory rose by an unexpectedly large 4.2 million barrels last week with US consumption bumping along some 6-7 percent lower than last year.
Although NY gasoline futures are down about 10 cents a gallon this week to $3.04, retail prices continue to climb, hitting a national average of $3.73. Average prices are already well above $4 a gallon in California, Alaska, and Hawaii, and only a few cents away in NY and Connecticut. US gasoline prices are now up about 14 percent in the last two months. The financial press remains optimistic that some sort of economic recovery is underway although the numbers are mixed.
The EIA issued a detailed report on the implications of refinery closures in Northeastern US. Although the refined product is already tight due to the closure of three major refineries serving the region, the EIA is most concerned about the possible closure of Sunoco’s 335,000 b/d Philadelphia refinery this coming July if a new buyer is not found. As the status of this installation is uncertain, other refiners are reluctant to invest in the necessary infrastructure to make up for its production until the refinery’s fate is known. The EIA sees the possibility of disruptions to oil supplies in the region in the second half of the year if the refinery is closed.
A California startup announced a major improvement in battery technology at a DOE conference on Monday. The new technology would allow the manufacture of all-electric cars with a 300 mile range at a much lower cost than is possible today. Some are hailing the announcement as a major paradigm shift for transportation.