Oil prices had persistent increases until mid this week when market eased and brought prices slightly lower last Thursday and Friday on news that the European Union (EU) will not embargo Iranian oil until summer; though the EU is yet to make a decision until their meeting on 23 January 2012. An official close to the group, who reportedly insisted on anonymity due to the sensitivity of the talks, stressed that they still have to see "current contracts between Iran and European refineries, and how long it would take those countries to find alternative sources of crude".
Moreover, the prospect of reduced energy demand in EU offset tight supply worries caused by turmoil in key crude producers Iran and Nigeria. The Eurozone is under pressure from debt worries: (1) the slowing growth in Germany and (2) the recently downgraded credit ratings of France, Austria and Italy.
Meanwhile, Victor Shum, senior principal at Purvin and Gertz international energy consultants in Singapore noted that “geopolitical supply side issues will continue to be the key bullish factor affecting oil prices. Besides Iran, the more immediate concerns that could affect supply are the strikes in Nigeria”. Nigerian Oil Union threatened to shut down the country’s crude output, in protest over the removal of the long-standing government fuel subsidies, which doubled local petrol prices. Nigeria produces more than two million barrels per day and is a key oil supplier to the United States and European Union.
In the US, the Energy Information Administration's weekly report on petroleum supplies showed gasoline demand fell by 4.8 percent last week from a year ago, while demand for all petroleum products dropped by 6.5 percent. Crude supplies rose by 5 million barrels last week while gasoline supplies grew by 3.6 million barrels. Distillate supplies including diesel and heating oil increased by 4million barrels. Analysts had expected oil supplies to shrink by a million barrels last week, with gasoline and distillate supplies rising by 1.75 million and 1.35 million barrels, respectively. Consumers and businesses reportedly cut back consumption while producers put more into storage than analysts expected.
This week’s averages however remained higher than in previous week. Both Dubai crude and diesel increased by more than US$2 to US$111/bbl and US$131/bbl, respectively. Gasoline increased as well by more than US$1 to US$123/bbl.
Sources:
- Yahoo news
- Reuters
- Platts