The terrorist attacks in Mumbai killed 119 and injured 335 and pushed the price of oil back to $55 on Thursday.
The terrorist attacks struck home the realization that we live in a violent time and oil supplies could be cut off at any time. Saudi Arabia has been in fear for years that terrorists would somehow knockout the monster Ras Tanurah oil terminal where the majority of Saudi oil is processed and exported. Knocking 5 million barrels of exports offline would be a major victory but so far the terrorists have been unable to accomplish that feat.
Still, the violence in Mumbai, which is not even an oil exporting city, brought back the realization that the terrorist element is alive and well. Osama bin-Laden has called on his followers to attack oil facilities to cause pain to the U.S. and to those who sell oil to America.
The violence overshadowed the massive jump of 7.28 million barrels in the U.S. weekly inventory report. This should have pushed oil prices to new lows but was offset by the Indian violence. Crude imports surged by +1.1 mbpd to 11.0 mbpd for the week. This level of imports cannot be sustained and will probably drop sharply if OPEC ever enforces the production cuts.
With oil prices hovering just over $50 there was another call for OPEC to cut rates at the meeting this Saturday. It appears the majority of OPEC countries now favor another cut at this meeting and again at the Dec-17th meeting. Analysts still feel this is just talk and nothing will happen this weekend. You can bet there will be another 1.5 mbpd cut at the December meeting if prices are still under $60. In a Bloomberg survey on Nov-21st 10 analysts expected OPEC to cut at the Cairo meeting this weekend and 8 expected the cuts to come at the Dec-17th meeting.
OPEC members appear to be on the verge of war with tensions rising almost daily as the price of oil declines. Those who need every dollar to fund their governments are hostile at countries calling for another production cut and at those who have failed to honor the last cut. Whenever revenue falls below levels needed to maintain normal government expenses the claws come out. Nigeria said it would not cut any more production until all the announced cuts had been made by the other OPEC countries. Nigeria, crippled with terrorist bombings keeping more than one million barrels of daily crude off the market, has already voluntarily cut 113,000 bpd as directed by OPEC.
Russian President, Dmitry Medvedev, said at a meeting in Venezuela that Russia will coordinate with Venezuela and other OPEC nations to keep oil prices from being either "Too low or speculatively high." He said Russia would be coordinating with Venezuela but "coordinating was not the same as colluding. Stable oil prices are important for us and our economy, just as they are for the economy of Venezuela and other countries."
The cost of renting a tanker to ship oil from the Middle East fell to a new 52-week low this week as supplies began to build globally and demand continued to fall. Freight rates from Saudi to Japan fell to the lowest level since Nov-13th, 2007. An Oslo based shipbroker said there was an ample supply of vessels including a steady stream of new ships coming to market.
The U.S. Minerals Management Service issued its final report on damage fro Hurricane Ike. The MMS said 60 of the 3800 oil and gas platforms in the gulf were destroyed. Those platforms were producing 13,657 bpd og oil and 96.5 million cubic feet of gas. Another 31 platforms were severely damaged and could take another six months to repair.