The numbers speak for themselves, says Phil Flynn of the PRICE Futures Group.
The Energy Information Administration reported that US crude supply is at the lowest levels since 2018 and the tool that the Biden administration is relying on to bring down prices, the Strategic Petroleum Reserve, saw supply fall to the lowest level since 2008. So, what will be the Biden administration’s plan to lower gas prices when the SPR runs out of supply. Or maybe the more important question is, what will they do if they have a real emergency that would require an emergency release of supply.
The Biden administration is convinced that they are on the verge of having a real emergency, still suggesting that a Russian invasion of Ukraine is imminent even as those in Ukraine and other parts of the world are not so sure. Is Putin playing this up to spike oil and gas prices so he can cash in, or is he just reminding the world that he holds all the energy cards in Europe? Whatever it is, Russia says their war games have commenced.
Yesterday for oil, it was the back end of the oil curve that showed most of the strength where the front end seemed to falter. This could be due in part because the spread between the front and the back end is near a record distance, or it could be because the market is suggesting that a release from global strategic reserves would only have a short-term impact on price and would actually be more bullish down the road. The market knows what the Biden administration should learn; that releasing oil into a hot market is only going to keep the market hot, increase demand, and continue to reduce supply.
The Biden administration feels they have no choice because their policies have played a big part in rising energy prices, and they know that they are getting the blame. It can be argued about all of the side issues that are causing the prices to go up but as everybody knows that reads The Energy Report, we predicted that this was going to happen before the president took office. There is not one policy that the Biden administration has done to encourage US oil and gas production. In fact, everything that they have done has discouraged oil and gas investment. Even their plan to supply Europe with oil and gas in the event of war leaves out US energy producers. The Biden administration refuses to engage US oil and gas producers because they view them basically as the enemy of their green energy agenda.
According to Deputy Bureau Chief & Chief OPEC Correspondent at Energy Intel, Amena Bakr, President, stated that “Biden called King Salman overnight. Regarding the oil markets, King Salman stressed the importance of maintaining balance and stability in the oil markets, highlighting the role of the OPEC+ agreement in this regard, and the importance of maintaining the agreement. Yet, he should have called the Crown Prince bin Salman because he is the guy running the show. Biden does not want to deal with the Crown Prince because he is a murderer, so why can he deal with Russian President Vladimir Putin, who he says is a murderer?” Just another example of Bidens’ disjointed and conflicted foreign policy.
Reuters reported, “Global supplies of diesel are dwindling as refiners struggle to keep pace with rapid post-pandemic demand recovery, exacerbating an acute global energy shortage which has already sent the prices of gas, coal, and crude oil soaring.” The US and Asian diesel imports on which Europe relies have been limited in recent weeks due to higher domestic consumption for manufacturing and road fuel purposes.
Regional stocks were at their lowest level for this time of year since 2008, according to the data, while Singapore’s onshore inventories of middle distillates also sank to multi-year lows of 8.21 million barrels. Gasoil inventories, which include diesel and heating oil, held in independent storage in Europe’s Amsterdam-Rotterdam-Antwerp (ARA) refining and storage area fell last week by 2.5%, data from Dutch consultancy Insights Global showed.
Back to the numbers for a bit and why they are so bullish. The EIA said that crude stocks fell by 4.8 million with Cushing stocks down 2.8MB. The SPR released 1.4MB and crude demand increased one million bpd. Ready-to-use ‘gasoline’ stocks fell 1.9MB. Total gasoline stocks fell 1.6MB. Production increased 740k bpd. Domestic demand increased 900k bpd, a new five-year high for this time of year. Distillates ULSD stocks fell 1.7MB. Higher sulfur stocks increased 762KB.
Learn more about Phil Flynn by visiting Price Futures Group.