Oil prices continue to get slammed on global demand concerns, hotter-than-expected CPI inflation, and a growing gasoline glut in the US, states Phil Flynn of PRICE Futures Group.
Concerns about an uptick in Covid in China are raising travel concerns and in the US, refiners’ quest to ramp up diesel fuel ahead of winter led to by default an increase in gasoline supply causing price breaks at the pump. Yet these concerns and the sharp oil price break could lead to run cuts and cause producers to stop producing, setting the stage for tighter markets ahead. Unless this seasonal softness in demand turns into a full-blown recession and we buck the strong seasonal trend in a mid-December trend that historically suggests that oil and products bottom seasonally right about now.
Yet the longer-term issues may be just how a so-called landmark deal by COP 28 tells us that they agree to a so-called transitioning from fossil fuels in the energy system in what they say is a just, orderly, and equitable manner. Or in plain language, it is more about the global elites trying to enhance their power by redistributing wealth to themselves and those they see fit to be blessed by their benevolence. As US climate Czar and frequent flyer on his wife’s private jets, John Carey puts it, “This is a moment where multilateralism has come together, and people have taken individual interests and attempted to define the common good.” The common good as he sees it is sending your tax money to other countries around the globe without the taxpayers having a say in how that money is spent.
Once again these global leaders celebrate their so-called climate achievements, the reality is that nothing that they agreed to is concrete, except when it comes to spending more taxpayer money and giving it to other countries they deem less energy fortunate. Oh yes, they agree to phase out inefficient fossil fuel subsidies that do not address energy poverty or just transition as soon as possible. The reality is that COP 28 aggressive actions on fossil fuels have failed to reduce greenhouse gas emissions and have made the global energy infrastructure less reliant and more vulnerable to attack. More than anything it has been the hardest on the poor people of the world.
COP 28 actions decidedly make energy prices higher. There is no doubt that we will be facing a world with sharply higher energy prices if COP 28 has their way. They will try to take money from rich countries and redistribute it to green energy companies that are in many cases politically backed. Beware of the growing power of the climate change industrial complex. This will once again become more about enriching certain people and making others poorer. And while there is no real plan or way to hold them accountable for these promises, the reality is they’re going to make these promises anyway.
The COP 28 promises to triple renewable energy capacity globally and double the average and annual rate with efficiency improvements by 2030.
They say they are going to accelerate efforts towards the phase-down of unabated coal power. Unless of course, you’re in China or India, it’s OK if they increase their coal capacity because let’s face it they are China and India.
I think John Kemp of Reuters had the quote of the day. He said COP 28 agreed to everything and nothing. This is all aspirational except when it comes to your wallet.
While they continue to tell you that their actions to take away your money and your rights are virtuous because scientists tell us that the climate is causing the planet to be doomed, they fail to recognize opposing scientific viewpoints that seem to suggest that there is no climate emergency. It doesn’t sound like solid science to me. Yet when you’re lusting for power and trying to redistribute wealth there’s no time to listen to dissenting voices. They say it’s all about the science as they are trying to take money away from reliable energy sources. The surge in greenhouse gases that are going to be needed to start to electrify the world is going to be huge and will not allow for these so-called targets to reduce greenhouse gas emissions to become a reality.
The CPI report yesterday helped pressure oil prices as well as concerns about slowing demand in China. Reports about travel restrictions and lower air travel in China are raising concerns, playing into the drop in Chinese oil imports. Yet at the same time, reports show that Chinese vehicle sales exploded, rising 27.4% in November and are up 29.4% year over year. I’m not sure how many of those are electric vehicles.
OPEC continues to say that the market has overreacted to slowing demand fears.
Yesterday’s American Petroleum Institute (API) showed a whopping build in gasoline supplies. That has raised concerns about a growing gasoline glut. The good news is that we’ll bring prices down at the pump. The bad news is it could lead to reduced runs tightening the supplies of heating fuels going into winter.API showed that gasoline supplies world a whopping 5.8 million barrels in the latest week this came as crude supplies fell 2.3 million barrels and distillates came in pretty much as expected up 300,000 barrels still, I think globally we’re going to have to do a lot better with diesel supplies going into winter.
Natural gas prices are trying to find a bottom. Prices have plummeted in recent days as talk of a polar vortex seems to have dissipated. Production levels continue to rise putting stress on smaller producers. Something’s gotta give in this market. Either we’re going to have to see prices rise or production will fall. The question is what will come first?
Learn more about Phil Flynn by visiting Price Futures Group.