On Energy Source:
On Energy Source:
Steven Kopits of Douglas Westwood Energy research discusses this urgency in a new report, noting that in the last 37 years, the US has suffered six recessions. From the beginning of each, he says, oil played a central role. In every case when oil consumption breached 4 per cent of GDP, he notes, the US has suffered a recession. Indeed, he says, the current US recession began within two months of oil hitting the 4 per cent threshold, when oil reached $80 per barrel.
Kopits also notes that a sustained rise in the oil price of 50 per cent or more has always been associated with recession, and this applies to the current recession as well.
Oil rose back towards the $69 mark on Thursday as further attacks on pipelines in Nigeria by militants helped reverse losses caused by a sharp jump in US fuel stocks.
Crude had dipped on Wednesday after weekly US supplies data showed gasoline stocks hit 3.9m barrels as refiners ramped up production ahead of the peak summer driving season, and distillates stocks rose to the highest level in over 10 years.
Gasoline and distillate’s relative abundance was somewhat offset by a 3.8m barrel drop in crude stocks but this, and an increase in refinery utilisation, failed to reassure many observers.
Commerzbank analysts wrote:
“The steep increase in gasoline stocks over the past weeks indicates that the underlying demand is weak and that more crude oil is being processed than there is actually demand for.”
“The American Automobile Association estimates that US holiday travel during the upcoming long Independence-Day weekend will be 1.9 per cent below last year’s level. Car travel is even expected to fall 2.6 per cent year on year. Hence, the latest decline in US crude oil inventories does not necessarily signal an improvement in the fundamental situation of the oil market [and] the oil price remains vulnerable to further declines.”
News of a raid on a Niger Delta pipeline by the principal militant group in Africa’s biggest oil exporter helped provide some support to crude prices.
The Movement for the Emancipation of the Niger Delta, the largest and most active Nigerian militant organisation targeting the country’s refining infrastructure, said it had attacked the Billie/Krakama pipeline linked to the Bonny crude terminal, one of Nigeria’s largest export points.
Years of attacks on the Nigerian oil industry have hampered production, meaning output has dropped to around two thirds of a total capacity of close to 3m barrels a day.
Nymex August West Intermediate, the US benchmark blend, rose 27 cents to $68.63, while ICE August Brent, the European oil standard, rose 45 cents to $68.78.
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