Oil Prices Recovering: What’s Responsible?

Since the beginning of October, Oil (NYSE:USO) has fallen fairly consistently, and with markets closed on October 30 the price per barrel is just $85.57, its lowest since July. U.S. commercial crude oil inventories are pushing against the upper limit for the average this time of year. At 375.1 million barrels, inventories are at their highest level since 1982. Supplies are 11.1 percent above last year’s level.

After dropping about 7 percent between October 18 and October 25, light crude for December delivery has remained relatively low and flat despite hurricane Sandy at $85.57 per barrel.

Various operational and geopolitical concerns have also failed to materially interrupt supply. Royal Dutch Shell (NYSE:RDSA)(NYSE:RDSB) will be completing repairs on its Pernis oil refinery in the Netherlands sometime in November. The Pernis refinery is the largest in Europe.

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Exxon Mobil (NYSE:XOM) looks like it will pursue a relationship with Kurdistan instead of develop the West Qurna-1 field in Iraq. The ambassador from Iraq has asked the Obama administration to pressure Exxon Mobil into slowing down or reconsidering its position in order to avoid political tension between Baghdad and the semi-autonomous northern region. Despite the concern, the company hasn’t backtracked.

After meeting with the Azerbaijan state-run SOCAR oil company, British Petroleum (NYSE:BP) will begin the process of ramping up production at the Azeri-Chirag-Guneshli oil fields. After a brief public spat, BP — perhaps distracted by the pending sale of its stake in TNK-BP — will work to deliver on its promise of producing 1 million barrels per day from the field.

While fears linger about the price dropping as low as $71 per barrel, a 9.9 percent increase in orders for durable goods in September is casting a positive light on events. Jobless claims dropped to a seasonally adjusted 369,000, spurring some hope that despite the headwinds, the economic recovery will continue.

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