Oil Prices hit a three week high only to be rebuffed overnight by the thought of slowing in China, the possibility that Greece may need another bailout and perhaps, rising supply. Other than that we still have Iran and Syria worries in the back ground. Saudi Arabia is pumping up a desert storm sending massive supply to the US to either try to win favor with the Obama Administration or to cover for the possibility of an attack that may be in the works. The New York Times reported that the a classified war simulation held this month to assess the repercussions of an Israeli attack on Iran, forecasts that the strike would lead to a wider regional war, which could draw in the United States and leave hundreds of Americans dead, according to American officials.
Christine Lagarde is worried about what is happening in our bond market saying the world is still in a danger zone. In other words, do not be tempted to start tightening despite what our bond market is saying. While yesterday it seemed the market ignored her warning but now, 24 hours later, perhaps they are starting to pay a bit of attention.
Another refinery hit the dust and to keep refiners in China from going bust like refineries in the US, they are increasing domestic fuel price for the second time in two months. Valero is the latest causality of refinery losses. While not a big gasoline producing refinery it seems that refiners are getting slaughtered by high input costs and tougher regulations.
China may try to control inflation by setting prices but in an admission that Brent crude prices are getting out of control, they have been forced to raise prices for domestic consumption much faster than expected. While this may slow demand a bit, the Chinese have some wiggle room as inflation is tamer. Besides, if they don’t raise prices, refiners will slow production causing shortages. Or they will go out of business like other refiners. China has kept the line on domestic prices that have exceeded the government’s 4% annual target. Yet in February consumer prices rose only 3.2% the smallest increase since June 2010.
While the Saudis are sending extra barrels of crude oil to the US, the Energy Information Administration reported that U.S. crude oil imports last year were both the lowest since 1999 and the first time they had fallen below 9 million bpd since 1999. The EIA U.S. crude oil imports during 2011 fell to their lowest level in twelve years and were down 12% from their peak in 2005, as higher domestic oil production and decreased consumption of petroleum products reduced American refiners' purchases of foreign crude.
U.S. crude oil imports averaged 8.9 million barrels per day (bbl/d) in 2011, down 3.2% (0.3 million bbl/d) from the year before. Imports of crude oil fell below 9 million bbl/d for the first time since 1999, according to full-year trade data in EIA's February Petroleum Supply Monthly. Since reaching a peak of 10.1 million bbl/d in 2005, oil imports are down 12%, or 1.2 million bbl/d.