Prices and production
Oil hovered around $72 until Wednesday when there was a surge in the equities market and forecasts that the EIAвЂ™s stocks report, which comes out on Thursday this week, will show a decline in the US crude inventory. Analysts are expecting a 2-3 million barrel decline in US crude stocks and after the close, the API announced that according to their survey US crude stocks declined by 7.3 million barrels last week. Oil for August delivery was up $2.09 for a $74.07 close. Last week Hurricane Alex forced the closure of the Houston ship canal for a day, which likely slowed imports.
MasterCard reported that US gasoline consumption last week was up by 0.2 percent over last year going into the 4th of July weekend. The 4th of July is usually the period of highest gasoline consumption in the US so if demand does not pick up next week, the outlook is for lower gasoline prices in the immediate future.
A revised forecast from the EIA says oil prices will average around $78 during 2010, which is 28 percent higher than the 2009 average of $61. The EIA now says that global demand for oil in 2010 will average 85.8 million b/d up from 84.0 million b/d in 2009. The administration also forecasts that global consumption will climb to 87.29 million b/d in 2011, an increase of 170,000 b/d over last monthвЂ™s forecast.
The EIA sees OECD demand declining by 20,000 b/d next year while demand from the rest of the world goes up by 1.5 million b/d.
The Kurdish Workers Party claimed credit for blowing up IraqвЂ™s 600 mile long northern export pipeline to Ceyhan, Turkey. Fighting between Turkish forces and Kurdish rebels has increased in recent months. Blowing up pipelines is relatively easy to accomplish and is one of the few ways the Kurdish rebels can bring pressure on the government.
Efforts to clean up and collect the leaking oil were hampered this week by bad weather that continued to affect the spill site in the hurricaneвЂ™s wake. Waves from three to six feet high are forecast to continue for the rest of this week. A new tropical depression similar to Alex is starting to form near Yucatan. However, if the weather improves the third oil collection platform above the leaking well could become operational during the next few days.
The first relief well is making good progress and only has about 200 feet to go. At this stage the process is very slow and precise. They drill only 10 or 20 feet and then send down an electromagnetic sensor that can detect the leaking wellbore. After this, directional corrections are made and the process is repeated with the objective of penetrating the leaking wellbore as squarely as possible. If all goes well and the penetration is made in the next week or so, it may take another week or more to pump in enough mud to overcome the pressure of the leak and stop the flow.
Peak oil notes - June 17Stocks slide on weak jobs report