Developments this week
Oil prices climbed in NY and London this week as the EIA issued a more-bullish-than-expected stocks report and the situation in the Middle East continued to deteriorate. US crude stocks fell 3.7 million barrels last week and gasoline fell by 2.4 million barrels. The API, whose weekly telephone survey has a rather spotty track record, had reported Tuesday night that the stocks had risen by 2.8 million. The EIA also reported that shipments of gasoline in the US rose 5.3 percent to 9.3 million b/d, but as usual US gasoline exports are part of this number. MasterCard figures which give a more accurate picture of US gasoline consumption will not report again until next week.
The Syrian situation continues to worsen with a large bomb going off in Damascus, the US accusing Iran of training Syrian militia forces to support the Assad government, and the fighting spreading over into Lebanon. The Saudis and other Gulf states have warned their citizens to keep out of Lebanon as local Shiites seem to be kidnapping Sunnis in retaliation for the Syrian uprising.
Israel is back to beating the war drums with time-is-running- out stories appearing in the press. There appears to be an unprecedented debate going on in the country as to whether the Iranians should be struck and just how the Obama administration could be pulled into supporting Israel by striking before the November elections. Israel’s outgoing civil defense minister is talking about a month long war involving missile exchanges. In Washington, Defense Secretary Panetta is saying that the window for talks is still open and that he does not believe the Israelis have made a decision to attack. All this war talk has Brent crude back to a three-month high, only about $8 a barrel below the four-year highs seen in March.
US gasoline prices have been following Brent upwards with NY gasoline futures climbing by eight cents a gallon on Wednesday to close at $3.08. US gasoline now retails for an average of $3.70 a gallon, up 40 cents in the last month. The fire at the Chevron refinery in Richmond, CA will take 4-6 months to repair and has already sent California retail prices up 22 cents a gallon in the past week. Analysts are talking of prices in California hitting $4.50 a gallon by Labor Day.
US natural gas prices have rebounded this week, closing at $3.08 per million BTU’s on Wednesday as traders peruse weather forecasts for the rest of the month.
Europe has been quiet this week as many movers and shakers are out of town for the August summer holidays. The second quarter EU GDP figures were slightly better than economists had expected but still leave the Union teetering on the brink of recession. The GDP for the Eurozone 17 contracted by 0.2 percent in the second quarter just barely missing the official definition of a recession as the GDP was flat in the first quarter. France’s economy was flat in the 2nd quarter while Germany grew by a greater than expected 0.3 percent. Six of the Eurozone countries including Greece, Spain, Italy, Cyprus, and Portugal have also asked for bailouts.