Oil prices were generally quiet on Monday and Tuesday, but jumped on Wednesday after the Federal Reserve announced a major increase in its securities purchase program and the IEA increased its oil demand forecast due to better prospects for China. The Fed’s quantitative easing program is generally believed to be inflationary thereby driving up oil prices. London crude closed at $109.52, up $1.64 for the day after having traded well above $110 earlier. The weekly stocks report showed crude inventories up by 800,000 barrels and gasoline stockpiles up by 5 million barrels while analysts had been expecting only a 1.8 million barrel increase.
US natural gas futures continue to fall due to forecasts of mild weather continuing in the Northeast. Prices have now fallen to $3.39 per million BTUs from over $4 in the last three weeks.
OPEC agreed to leave its 30 million b/d production cap in place and extended the term of the current Director General after disagreements between Iraq and the Saudis. As OPEC’s second largest oil producer with prospects of still higher production coming, Baghdad is becoming more assertive in OPEC affairs and is starting to challenge Riyadh on issues such as production cuts. OPEC production was up a touch in November led by Saudi Arabia, Angola, Algeria, and Libya. Iranian and Nigerian production were down a bit.
OPEC is having its best year ever in which crude will average about $112 a barrel for the year. As could be expected Iran asked OPEC to cut production thereby driving up prices and offering Iran some relief from its sanctions-reduced export earnings.
The feuding between Baghdad and its semi-autonomous Kurdish province continues with some observers concerned that the situation could deteriorate to military action.
The situation in Syria continues to deteriorate as rebel forces threaten the center of Damascus, suggesting that the Assad government will not last much longer. Government forces are now firing SCUD missiles at rebel-occupied areas of the country. The issue will soon be what the post-Assad era looks like and how far the recriminations will spread across the region. The turmoil in Egypt continues as the Morsi government attempts to establish a more Islamist constitution in the face of opposition from the secularists. The country can no longer afford to export natural gas so is considering building LNG import facilities to keep the power plants running.
Elsewhere in the world, China’s economy seems to be doing better, leading the IEA to increase its global growth forecast for 2013 by 100,000 b/d to 865,000, and Italy is again in political turmoil as the technocrat prime minister decided to resign and Berlusconi is back running for office.
Venezuelan President Chavez is reported to be in a stable condition after a complex and difficult fourth operation for cancer. Vice President Maduro spoke of “difficult times” ahead and appears to be preparing his people for a change of government. Venezuela is currently exporting about 1 million barrels of oil a day to the US and has a history of reducing production during times of political turmoil.