Prices and production

After continuing to fall on Monday and Tuesday, oil prices reversed and closed nearly $2 a barrel higher at $85.84 on Wednesday. The surge came after the US stocks report showed a 2.2 million barrel draw as opposed to the 1.1 million barrel increase the market had expected. This was the first decrease in US crude stocks for 10 weeks. The report also showed that US demand over the last four weeks is running 2.8 percent ahead of last year. Wholesale gasoline also climbed back close to the high of $2.36 a gallon set last week.

The recent jump in crude prices has a growing number of technical analysts around the world predicting that prices soon will climb into the $90s. If that happens, the spotlight will shift to the one country—Saudi Arabia—with the capacity to add enough oil to the market to cool off prices.

Although some rain has fallen in Venezuela and southwestern China, reservoirs continue to fall but at a slower pace. It’s a near certainty that both countries will eventually have to rely on fossil fuel power to replace hydro power.

China’s auto sales in March jumped 56 percent year on year to an astounding 1.74 million cars. There are already indications that the pace of 20 million units a year is starting to slow. On Wednesday Beijing raised the price of gasoline and diesel by an average of 4.6 percent.