For the past week oil prices, as usual, bounced up and down in accordance with the financial news of the day. On Monday the bailout of Citibank sent oil up 3 dollars on hopes that things were getting better. Tuesday was a down day with a deluge of bad economic news erasing Monday’s gain. Then on Wednesday the biggest Chinese interest rate cut in 11 years sent prices back up to close at $54.22.
US crude inventories rose by 7.2 million barrels last week vs. analyst expectations of a 1 million barrel increase. Crude imports are running well above normal as refiners take advantage of the low prices. The US crude stockpile now has increased for nine straight weeks, a fact that is sure to be noted by OPEC.
Iraq’s northern export pipeline is back in service after a bombing 50 miles north of the Iraqi border by Kurdish insurgents last week. By some strange coincidence, Baghdad announced that Iraq’s Kurds would now be allowed to use the pipeline to export oil from their fields
Elsewhere announcements of delays or cancellations of oil projects continue to be made around the world. This has led to expressions of concern from IEA and other industry leaders who understand the implications of falling investment for future oil production.
Fighting between government forces and various insurgent groups seems to be increasing in Nigeria. The country’s electricity production is now down to one-third normal due to sabotage of natural gas lines serving power stations. The overall situation in Nigeria continues to deteriorate, with low oil prices hurting the budget; the MEND threatening to resume full scale attacks; and the government unable to come up with its share of the money to invest in joint oil production projects.