1. Oil and the Global Economy
After falling by some $30 a barrel since early May, oil prices rebounded in the last 10 days reaching a high of $88 in New York and $102 in London last week. As has been the case for many months now the interplay between fears of a slowing global economy and possible disruptions of Middle Eastern oil supplies has been the underlying impetus for price moves. Late last week economic concerns came to the fore as a weak US jobs report combined with a gloomy IMF projections of global economic growth to trump an elevated level of saber rattling in the Middle East. The week ended with NY futures trading at $84 a barrel and London at $98 after having traded above $100 for much of last week. A weaker euro contributed to the price decline on Friday.

A 2-week-old oil workers strike in Norway which has taken about 240,000 b/d or 15 percent of Norway's production off the market contributed to last week's price rise. Negotiations over the weekend seemed to have reached an impasse. The oil companies are threatening to halt all production in hopes that the government will order compulsory arbitration, forcing the oil workers to return to their jobs.

The weekly US stocks report showed crude supplies up by 4.3 million barrels last week and gasoline stocks up by 200,000 barrels. Over the last four weeks US gasoline consumption has been running 4.3 percent lower than in 2011. MasterCard announced that its weekly Spending Pulse report on US gasoline consumption which it has been releasing since 2007 will ony be released every two weeks. This report usually gives a more precise picture of US gasoline consumption than does the EIA data as it measures gasoline sales at the pump rather than refinery shipments which may end up in storage or as exports.

US natural gas prices which have been climbing steadily since mid-June due to unusually warm weather briefly topped $3 per million last Friday before tumbling 25 cents to close at $2.77 -- still way below the cost of production. The EIA announced last week that natural gas is now fueling as much US electricity production as is coal. When natural gas falls below $3 per million it becomes competitive with coal for power generation. In recent months there has been a major decline in the amount of drilling for gas and an increase in its use by electric utilities. So much drilling has taken place in recent years, however, that inventories continue to rise. Some are already worried that generally higher temperatures will lead to reduced consumption next winter.

2. Economic growth
Christine Lagarde, the Managing Director of the IMF, announced on Friday that the Fund will soon be releasing a somewhat lower forecast of global economic growth than its current projection of 3.5 percent. Lagarde cited simultaneous cuts in interest rates by the EU and China as evidence that the global economy is in for more trouble ahead. Spanish and Italian bond rates jumped on Friday, raising doubts that the supposed "breakthrough" agreed by EU leaders two weeks ago will gain traction. A meeting is scheduled for Monday to discuss bailing out Spain's banks, a rescue package for Cyprus, and what to do about Greece.

The next IEA projection of global oil demand for 2012, which will be released on Thursday, will likely factor in the newest IMF assessment of the global economic situation and possible reduce projections for oil demand.

Meanwhile the US employment report released on Friday shows jobs growing at a "dismal" pace of 80,000 new jobs during June, the third straight month the number has been below 100,000. Economists say a job creation pace of 125,000 jobs is necessary to hold unemployment stable.

The bad economic news suggests to many that another round of "quantitative easing" will begin soon that usually weakens the dollar and increases oil prices.

3. The Iranian confrontation
The situation entered a new phase last week when the EU sanctions on Tehran became fully effective. So far Tehran's response has been confined to saber rattling as its oil exports have been dropping for months in anticipation of the July 1st deadline. Iran announced that the US and EU would be responsible if the embargo led to a global economic crisis and called for an emergency meeting of OPEC. It also spent three days last week firing off dozens of ballistic missiles and warning that the 35 US military bases within range of its missiles would be destroyed within "minutes after an attack" on Iran.

The Israelis hinted for the umpteenth time that Tehran had better get down to serious negotiations soon or there would be an attack on its nuclear facilities. Although the most recent high-level nuclear talks produced no results, talks at the "technical level" continued last week.

Some 100 members of Iran's parliament made a splash by claiming to have introduced a bill requiring the government to block the Straits of Hormuz in response to the EU embargo. As blocking the straits would be tantamount to a declaration of war on much of the oil-importing world and if implemented would almost inevitably lead to hostilities, Tehran quickly announced that no such bill had been introduced.

In the meantime, Tehran is losing about $3 billion a month as oil exports slump and the world price hovers around $100 a barrel. The pressure is clearly on Tehran as it is running out of space to store oil and may soon have to curtail production. The Iranian economy is beset with spiraling inflation and mounting unemployment. No relief to this situation, short of progress in the negotiations, is anywhere in sight. Last week Switzerland and Kenya agreed to curtail imports of Iranian oil under pressure from the US and the EU.

Secretary of State Clinton said last week the Iran will face increasing pressure from the economic sanctions. The US has been weighing additional measures that would make it still harder for the Iranians to conduct economic transactions with foreign countries.

Quote of the week
"There has been a "boom in oil production" of late, Monbiot says. Wrong. Global production has been essentially struggling along a plateau since 2004."
- Jeremy Leggett

The Briefs (clips from recent Peak Oil News dailies are indicated by date and item #)

• The combination of melting sea ice and global atmospheric warming are contributing to the high rate of warming in the Arctic, where temperatures are increasing up to four times faster than the global average. (7/7, #5)
• Nigeria reportedly loses $1 billion a month to massive oil theft by criminal gangs, militants and corrupt officials, crippling Africa's top oil and gas producer amid political turmoil that many fear heralds' trouble between the Christian south and the Muslim north. (7/7, #10)
• Royal Dutch Shell's drilling off Alaska's north coast will be delayed until August as the company waits for ice to clear and modifies a spill-response vessel to meet US Coast Guard requirements. (7/7, #14)
• A major oil terminal in eastern Libya was shut down by protesters angry over the allocation of seats in a national assembly. (7/6, #7)
• Protest demonstrations were held in different parts of Peshawar in Pakistan against excessive power load shedding. Protesters blocked city's major arteries for about six hours, causing much inconvenience to motorists amid scorching heat. (7/6, #8)
• Angola is poised to throw open oil exploration rights in the offshore Kwanza Basin following a major strike by Houston-based Cobalt International Energy. This find is expected to give Luanda a big boost in its drive to double production from the current 1.8 million barrels per day to 3.5 million bpd by 2020. (7/2, #8) (7/6, #9)
• Tullow Oil said a big oil discovery made in Kenya earlier this year was even larger than initially thought. Based on the data from its Ngamia-1 well, Kenya could have more oil than Uganda, where it is spending $10bn to develop some 2.5bn barrels of crude, in partnership with Cnooc of China and Total. (7/5, #7)
• A new deepwater natural gas province with possible reserves of 1.5 to 2 trillion cubic feet has been discovered off the coast off Mexico's southern Gulf state of Veracruz, state-owned oil and gas firm Pemex said. (7/4, #8)
• Japanese researchers have discovered significant amounts of rare earth deposits on the bottom of the ocean about 1,243 miles southeast of Tokyo. (7/4, #9)
• A decision by Pennsylvania lawmakers to block shale gas drilling in two counties is a blow to the state's prospects, an industry official said. Lawmakers last weekend backed a ban on drilling in shale plays in Bucks and Montgomery counties until such time that the state's Department of Conservation and Natural Resources can complete a five-year study of the region. (7/3, #10)
• The US Department of Interior said it completed environmental reviews for onshore and offshore wind energy, including a 3,000 megawatt project. Interior Secretary Salazar announced the final environmental impact statement was released for the proposed Chokecherry and Sierra Madre wind farms in Wyoming. The complex could include as many as 1,000 turbines and generate as much as 3,000 MW of power. (7/3, #11)
• Oil developed from shale deposits in the North Slope of Alaska could eventually find its way into the Trans-Alaska Pipeline system. Ed Duncan, president of independent energy company Great Bear Petroleum, told the Platts news service it aimed to conduct tests in shale oil deposits in the North Slope of Alaska. (7/2, #13)
• Chesapeake Energy made $5.5 billion in pretax profits since its founding more than two decades ago. So far the company has paid income taxes on almost none of it. The company and other US oil and gas producers can thank a century-old rule that allows them to postpone income taxes in recognition of the risk of drilling wells that may turn out to be dry. The break may be outdated for companies such as Chesapeake, which, thanks to advances in technology, struck oil or gas in 99.6 percent of its wells last year. (7/2, #14)
• Norwegian energy company Statoil announced it made a significant gas and condensate discovery in the North Sea off the coast of Norway. Statoil announced, alongside minority partner Total E&P Norge, the King Lear prospect could hold as much as 200 million barrels of recoverable oil equivalent. (7/2, #17)