Oil prices can’t decide whether they should fear a recession or the Fed trying to create one because last week’s jobs numbers were incredibly strong, states Phil Flynn of PRICE Futures Group.
If you think that is a dilemma, just think of the dilemma United States Secretary of Transportation Pete Buttigieg must deal with. Remember when Americans were struggling with near record-breaking gasoline prices, Mr. Buttigieg said families that buy electric vehicles (EVs) will “never have to worry about gas prices again.” And while that may be true. They may have even bigger worries as now there are many cases where it is more expensive to charge your electric car than it would be to fill it with gas.
Kelly Bluebook says that if you drive about 1,058 miles per month (Americans drive an average of about 12,700 miles annually). For an EV, you will use about 353 kWh in that timeframe. Using the US household average from October 2022 of about 16 cents per kWh, it would cost about $56 per month to charge an electric car at home. According to AAA, the average price of gas hovers at $3.42 per gallon as of this writing. So, filling up a 12-gallon gas tank currently costs about $41. Things get a little tricky because, as we all know, cars and trucks use vastly different amounts of fuel.
The problem with Mr. Buttigieg’s promise is that as more cars draw electricity from the grid the cost of electricity will rise. To help the grid they now must add batteries to handle the load. This means that electric cars will not save you money over gasoline over time and in the not-too-distant future. And that is even before the government bans natural gas stoves.
Two massive earthquakes that hit Turkey and northern Syria have disrupted oil exports from the region early reports show that more than 1400 people were killed and many more are stuck in the rubble. Iraqi Kurdistan suspends oil exports via Turkey.
Oil prices are caught up in macro forces and refinery maintenance, and while there are some concerns about demand in Saudi Arabia there seem to be signs of hope. Saudi Arabia decided to raise the prices of their crude oil in Asia. Another sign that China’s reopening is going strong.
Oils’ big sell-off near key support should hold. Weekly crude builds have slowed down the market momentum, but its refineries start to regain momentum supplies will start to tighten. What looks like a short-term glut will look a lot different in a few months when we start to see major inventory draws in the coming months. Use the weakness to put on bullish strategies and get hedged ahead of the summer.
Can Freeport save the Natural Gas market? EBW Analytics says that the NYMEX front-month contract traded as low as $2.341/MMBtu intraday Friday—down 50¢ week-over-week—as the February forecast shed another 52 gHDDs and 80 Bcf of demand. Exceedingly mild weather may swell storage surpluses through the end of the month.
A third consecutive larger-than-expected EIA draw, growing indications of Freeport’s return, and major technical support offer glimmers of hope that a reversal higher is possible. If February continues to drop gHDDs, though, it may prove difficult for natural gas to bottom.
Learn more about Phil Flynn by visiting Price Futures Group.