Crude prices started the week firmly as traders hoped for an improvement in the US economy, the US dollar remained weak, and Nigerian militant attacks continued to cut production. On Tuesday prices jumped to $73 a barrel when a rogue trader in London, acting without authorization, amassed huge positions in Brent crude, losing his firm $10 million in the process. By Thursday, concerns shifted back to the state of the US economy with the release of worse-than-expected job numbers. With hopes that an economic recovery would start later this year fading, the equity markets dropped sharply taking oil prices with them. Prices fell from nearly $72 a barrel on Tuesday to touch a low of $66.10 on Friday.
On Tuesday, the American Petroleum Institute released its survey showing that US crude supplies had fallen by 6.8 million barrels the previous week. The IEA stocks report issued the next day showed a more modest drop of 3.7 million barrels in crude inventories which was overshadowed by a 5 million barrel increase in gasoline and distillate stocks. US demand for oil products remains weak and stocks of gasoline and particularly distillates continue to build.
The IEA is becoming more pessimistic about a rapid economic recovery leading to an oil supply crunch anytime soon. The IEA revised its mid-term estimate of oil demand down to an annual increase of 0.6 percent each year from a previous estimate of 1.6 percent a year. In the IEA’s view, slower economic growth puts off the threat of shortages and prices spikes for a while longer.