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 oil is riding a wave of economic optimism coupled with the realities of rising demand against a backdrop of OPEC plus Russia production cuts and the new International Maritime Organization low sulfur diesel regulations. We also are getting support on expectations of a sizeable crude oil supply drop in the Energy Information Administration weekly data. Reuters is calling for a 1.8 million-barrel crude draw but up 2 million barrels on gasoline and 900,000 barrels on distillate. Runs are expected to be up 0.5.
Oil is getting support from flawed predictions of a global recession and thoughts that the U.S.-China trade war would sink global oil demand. Now with phase one of the trade deal in sight along with U.S.-China stimulus spurring oil demand, expectations are starting to rise. The dollar is starting to weaken along with more concerns that shale oil production is starting to roll over. Investors are shunning investment and banks are wary.
In France, they are having issues. S&P Platts reports “Shortages of oil products have started mounting as staff at several French refineries continue strike action, resulting in increased imports of diesel and Gasoil, sources said Friday. There are shortages of products in France,” a diesel trader said.
Gasoil traders also noted increased demand in Northwest Europe as a result of the industrial action in France. “I have seen some French demand for diesel in ARA,” another trader said, adding he expected the impact of the strikes to be felt later when strategic stocks have to be replenished.
French labor unions, including the CGT, FO and FSU, have called on employees in all sectors to take part in industrial action against the government’s pension reforms. The strike, which started December 5, has been extended several times. As the industrial action has also affected the ports, which have halted operations on multiple days and tug assistance has also been disrupted, imports have been facing difficulties, and France has had to use some of its strategic stocks, traders said.
Natural gas came back up on a potential return to winter. You remember winter, don’t you? We had it on Halloween. Yet Bret Walts of BAMWX says that winter may not stay that long. He writes that major warmth persists over the next 7 days for the Eastern U.S. with warmth also present in the northern CONUS and Canada. However, into the 8-14-day period, the warmth begins to shift to primarily the Eastern U.S. as colder air builds in Western Canada.
A strong cold front ~Jan. 5 – 8 will likely allow for cooler air to briefly spread eastward in the northern/NE U.S and perhaps the East Coast. However, any cool down looks to be relatively short-lived. Overall, aside from maybe a few days late-week 2, heating demand should remain below normal into the week three period (and likely dropping again into week 3) with warmer risks, especially in the SE US by Jan. 10.
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