The record Strategic Petroleum Reserve release (SPR) is like taking alcohol as a pain reliever, states Phil Flynn of the PRICE Futures Group.

It may seem like a good idea now, but you will end up with a heck of a hangover. US SPR crude inventories fell by 3.9-million-barrel last week, down 560.7 million barrels, which helped allow the American Petroleum Institute (API) report to show a 7.757-million-barrel crude build. Yet, what is one to profit if you build on crude oil and product supply tanks? The API showed massive draws on gasoline, to the tune of 5.05 million barrels as well as a 4.961-million-barrel draw in distillates. So, as you can see, dumping a lot of oil on the markets, especially if it is not the type of oil favored by US refiners, might not have the desired impact on gas and diesel prices that one might think.

In the same way, Biden’s E15 summer waver might not help gas prices that much. Ethanol gets less bang for the buck and I want to make it clear that I am pro-ethanol and everything and above in a competitive market, Biden is just doing this to try to appease ethanol supporters in Iowa. I did get calls from ethanol supporters that wanted to make it very clear that E15 does not create any more smog than E10. That of course was widely reported erroneously from many news sources. They wanted me to point out that E15 probably has less volatility than E10, and probably produces less smog.

I stand corrected, but that was not the point of my article yesterday. My point is that Biden is using this ethanol waiver at a time when the risk of global starvation, especially in poor countries, is higher than it’s been in some time. It was more about the messaging than it was about being either pro or anti-E15. E10 creates smog but gets a waiver.

As I have said before, I think Biden should use his influence to support US farmers in producing more food to offset what I see as a potential global food crisis. The US farmer can step up and fill the void to a large extent from the loss of Ukrainian and Russian grain supplies. We have a lot of unused acres that we could put into production. It would be a lot more meaningful for a farmer than some temporary waiver that at the end of the day will only mean a few pennies per gallon to most Americans. If Biden wants to support the corn industry, how about a free popcorn give away for each fill up.

That might do more to help farmers than this temporary E15 wavier.

Oil prices dipped after the International Energy Agency warned that due to the Chinese Covid-19 lockdowns, they reduced their demand forecast for 2022 by 260,000 barrels a day to 99.4 million barrels of oil a day. Yet IEA also says that global oil inventories have decreased for 14 consecutive months, with February stocks 714 mb below the end-2020 level. OECD stocks fell by 42.2mb to 2611mb in February, nearly double the seasonal trend. Preliminary data show a build in OECD stocks of 8.8mb for March.

OPEC yesterday lowered their demand forecast but they also lowered their production forecast for non-OPEC countries, which turned out to be a net deficit. OPEC cut its full-year 2022 world oil demand growth by 3.67 million barrels. The previous forecast for growth was 4.15 million barrels. They cut their global economic growth forecast mainly because of the Ukrainian crisis and concerns about China but at the same time, they cut their forecast or non-OPEC oil production by 320,000 barrels a day to 2.7 million barrels a day. They also lowered Russian liquid production by 530,000 barrels a day. This forecast would confirm a very tight oil market going forward.

Based on market action, we still believe that the oil risks are on the upside! This week’s low might be below what we see for the rest of the summer. The downside risks are China’s shutdown over Covid-19, as well as the risk of a significant drop in economic activity. The Iran nuke deal does not look imminent. The JCPOA looks like it is going nowhere. Global spare production capacity is small. Other than that, we feel that we will trend back to the old oil invasion high to retest sometime during the summer months.

If the Energy Information Administration confirms the API’s big drop in gasoline and distillate, then it’s probably a good time to add to the long product short crude trades.

Natural gas is still impressive. Yet while we are still bullish, we have to be on guard for a correction. EBW analytics says that the NYMEX May 2022 natural gas contract continued sharply higher over the past week, posting a month-to-date gain of $1.038. Still, the front end of the curve is being outpaced by winter 2022-23 contracts—spotlighting concerns with the ultra low storage trajectory and continued further upside price potential. Near term, however, an array of bearish risks points to the potential for a correction: technical signs of exhaustion, rising supply, fading LNG, softening 11–15-day weather, and projections for a weakening storage deficit into May.

Nonetheless, the market is preoccupied with winter supply risks—with few price-sensitive fundamental mechanisms remaining to loosen the market.

Learn more about Phil Flynn by visiting Price Futures Group.