Phil Flynn
About The Author

Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

The crude oil glut does not help gasoline supply. Gasoline prices hit the highest price since last January as supply continues to fall and demand continues to rise. While traders are fixated on the so-called glut of oil supply and the resumption of Libya’s largest oil field, the global surplus is tightening. Bloomberg News reports that since mid-February, between 10 million and 20 million barrels have left storage in the Caribbean, a sign that the global market is tightening. More important for drivers, the supply of gasoline in the U.S. is tightening at a frantic pace. Big oil investments have been cut back and according to the Wall Street Journal, they will be happy to break even. It is the calm before the bullish storm as the markets are in a comfort zone not realizing that the lack of investment and falling global inventories are setting the stage for a larger rally and a much more expensive summer driving season.

Jason Schenker, the President of Prestige Economics, LLC, agrees. In a Bloomberg op-ed piece he said, “Traders in the energy market are too focused of late on crude oil inventories. When oil inventories rose in last week’s Department of Energy report many zeroed in on the fact that they increased less than expected to explain a bump higher in the price of crude. Traders largely ignored recent trends showing sharp drops in gasoline and distillate inventories. Schenker points out that while crude inventories increased, “product inventories fell in last week’s DOE report by a combined 6.2 million barrels, bringing the total product inventory decline over the past six weeks to 36.5 million barrels.” That’s the biggest six-week drop in almost 11 years — and the summer driving season doesn’t even start for another seven weeks.

That is being reflected in higher prices at the pump. AAA says that gas prices hit an average price of $2.33 per gallon for regular unleaded gasoline and is four cents more than a week ago, one cent more compared to one month ago and 27 cents more than the same date last year. National gas prices have increased six of the last seven days. AAA says that while the increase in prices has been moderate, it is possible this trend could continue as refinery maintenance wraps up, more expensive summer-blend gasoline becomes available and driving demand increases this spring.

Big oil is not so big. Sarah Kent of the Wall Street Journal writes, “The world’s biggest oil companies are struggling just to break even. Despite billions of dollars in spending cuts and a modest oil-price rebound, Exxon Mobil Corp., Royal Dutch Shell PLC, Chevron Corp. and BP PLC didn’t make enough money in 2016 to cover their costs, according to a Wall Street Journal analysis. The Journal writes, “To calculate each companies’ free cash flow—the excess cash remaining after costs—the Journal deducted the firm’s dividends and capital expenditures from its cash from operations. All four firms fell short of cash flow for the year, although Exxon said it broke even by its own metrics, which exclude dividends. The analysis also showed that the four companies ended last year with more debt than they began it.“ That lack of profitability by big oil means that they will not risk big money on higher yielding, more expensive energy projects. They will go with the low hanging fruit like shale that will leave the market very under supplied in the next few years.

While oil stalled at $55.00 a barrel as U.S. inventories stayed strong, it is probably reducing the long-term investment we will need for future demand. If you are fixated on the moment you may think we have plenty of supply. If you are a futures trader you must look to the future and realize that we are going to see a significant tightening of supply in the coming weeks and months and years. The gasoline and product tightening is the first phase and in a few weeks, it will be the oil. Imports to the U.S. are falling and the exports will be rising. Demand for gas and diesel are starting to heat up. Do not be surprised when the glut of oil is gone. The signs are all around.

Prosper this April all month long! Tune to the Fox Business Network! Call me for the latest trades at 888-264-5665 or email me at pflynn@pricegroup.com.

Thanks,
Phil Flynn

 

Questions? Ask Phil Flynn today at 312-264-4364

View The Energy Report Archiveswww.pricegroup.com

A Subsidiary of Price Holdings, Inc. – an Employee Owned Diversified Financial Services Firm. Member NIBA, NFA

Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.

The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2017

Leave a Reply

Your email address will not be published. Required fields are marked *

Security Question * * Time limit is exhausted. Please reload CAPTCHA.