Developments this week
New York oil has hovered around $99 this week and London around $110 as the interminable EU debt crisis balanced off the turmoil in the Middle East. Natural gas prices in the US rebounded sharply this week after several major drillers announced they were cutting back on new drilling and production due to very low natural gas prices and the prospect of even more warm weather in the weeks ahead. US gasoline futures, which had traded below $2.40 a gallon last Friday, climbed rapidly this week, closing at $2.83 a gallon on Wednesday. Gasoline futures are now trading only 16 cents a gallon below the highs reached last April.

On Monday, the EU announced its phased plan to stop oil imports from Iran until there is some resolution of the nuclear enrichment issue. New contracts with Tehran pertaining to oil are forbidden and most imports are to be halted by July 1st. Iranian politicians responded to the decision with another round of threats to close the Straits of Hormuz. In the meantime Iran’s currency has taken another hit as moves are underway to limit Iranian ties with financial institutions in the US, EU and their supporters.

The EU debt crisis rolls on with little or no progress in settling who pays how much for Greece’s debts. The crunch on this one is coming in March. The World Bank and IMF continue to warn of slower economic growth ahead and the UK’s GDP was reported as declining in the 4th quarter.

Elsewhere there have been numerous developments in the last few days that will likely have an impact on the global oil supply/demand balance. The Syrian situation continued to deteriorate towards a civil war, as Damascus rejected the latest Arab League peace plan. More voices are calling for UN intervention as the body count rises.

Bombs continue to go off in Iraq threatening the country’s political stability and plans for major increases in its oil exports. In Nigeria 165 were killed in bomb attacks on government buildings. The IEA is predicting that Nigerian oil production will decline during 2012 as violence spreads. South Sudan has shut down its 350,000 b/d of oil production in a dispute with the north over pipeline transit fees.

Petroplus, Europe’s largest independent refiner which operates plants in France, Belgium, Switzerland, Germany, and the UK, filed for bankruptcy, forcing the closure of at least one refinery. This development adds to the problem of falling refining capacity in the Eastern US as hundreds of thousands of barrels per day of gasoline are shipped to ports on the US East Coast from Europe.

Platts reported that China’s apparent demand for oil in 2011 increased by 6.1 percent to an average of 9.25 million b/d. In December of 2011 apparent demand was up to 9.69 million b/d, the highest ever.

In Washington the EIA made a major downward revision in the estimated amount of gas that can be recovered from the Marcellus Shale in the Eastern US. The Agency now projects that 141 trillion cubic feet can be recovered vs. last year’s estimate of 410 trillion.