Prices and production
So far this week, oil has traded around $74-75 a barrel without any particular news to send prices higher or lower. As has become normal, equities and oil jump up or down in accordance with the latest report on the prospects for the economy. Even the smallest scrap of news can have an inordinate effect. Although US stockpiles, especially of gasoline have been growing in recent weeks, this is more a function of how much refiners import as US demand for oil has remained relatively steady around 19.6 million b/d. Prices continue to be supported by solid, if not as spectacular, demand from China and capped by the generally weak outlook for US and OECD economic growth.

The weekly US stocks report, that was delayed for a day because of the holiday, showed a 2 million barrel drop in crude stocks, but left total commercial petroleum inventories nearly unchanged. The EAI report is in marked contrast to the American Petroleum Institute that was released Wednesday night reporting a 7.3 million barrel drop in crude stocks.

A Platts survey shows OPEC production falling 110,000 b/d in August to 29.11 million b/d. A Bloomberg survey has OPEC’s August production falling by 75,000 b/d to 29.15. OPEC is warning that there is likely to be a slowdown in the demand for oil during the rest of this year and foresees increasing production from non-OPEC producers next year.

The BP Report
BP’s long-awaited internal investigation of the causes of the Macondo explosion was released on Wednesday. The report says the explosion, fire, and oil spill were caused by a series of mistakes, but attempts to head off the charge of gross negligence and share the blame with Transocean and Halliburton.

The report was immediately denounced by Transocean and Halliburton as containing many errors and inaccuracies. At stake of course are billions of dollars in liabilities and even criminal prosecutions depending on how the blame for the explosion is ultimately apportioned. This is but one of the opening salvos in a legal dispute which will likely continue for years if not decades.