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
Joe Biden voters are getting an early return on their vote investment as markets start to price-in higher energy prices. While Vice-President Joe Biden promised he would not raise taxes on anyone making less than $400,000 a year, he did not promise that they would get to keep their money. He clearly said that they would be paying an invisible tax that all hardworking Americans will face with his green energy policies to raise the cost of gasoline and natural gas, and electricity. Whether knowingly or not, millions of Americans voted for higher gas and electricity prices and, based on market action, are already getting a return on their vote investment.
The appointment of Senator John Kerry as your climate change czar is a clear sign to the market that U.S Energy producers and manufacturers will be sold out to foreign interest in the interest of globalism and saving the planet. The U.S is to be penalized for its economic success that has led the world and now will have to take a backseat to developing economies. At the same time, countries like China’s manufacturers prosper in reparations because they could not pollute as much in the past because of their former communist and socialist economic system. The good news is energy traders might have some great opportunities, but if the Republicans lose the Senate, expect to give most of those profits back to the government.
Also, a presumed dovish Treasury Secretary Janet Yellen means the likelihood of a weaker dollar that may help our exports but will mean higher oil prices.
Oil prices hit an eight-month high on all of the excitement and have broken out; as we wrote, we felt that oil was in the process of bottoming for a seasonal low, and that has played out. Oil is breaking out, suggesting not only a much tighter market but expectations of a much faster demand recovery than had been previously priced in because of the Covid 19 plague. Project “warp speed” and the success with a viable vaccine on the horizon has shocked energy bears and has them reassessing the world around them. Reuters points out that the Brent crude six-month calendar spread moved into backwardation yesterday for the first time since March 2. Backwardation is both a symptom and a cause of the anticipated drawdown in oil inventories next year.
Oil prices may rise even higher as we get today’s Energy Information Administration (EIA) report. The market will look at demand numbers to see how it is holding up despite more lockdowns. The American Petroleum Institute (API), in their version, showed a 3.8-million-barrel increase in U.S. crude inventories, according to people familiar with the data. That would be a third straight week of gains if the EIA confirmed.
The API also reported that gasoline inventories increased by 1.3 million barrels of gasoline for the week ending November 20—compared to the previous week’s 256,000-barrel build. Analysts had expected a 614,000-barrel build for the week. Distillate inventories fell by 1.8-million barrels for the week, compared to last week’s 5.024-million-barrel draw, while Cushing inventories fell by 1.4 million barrels.
Nat gas looks like it could recover from its recent price crash as the weather might become a factor again. Bret Walts, BAMWX Meteorologist and Assistant Director of Operations, says that November was well advertised as a very warm month. Still, we look to at least briefly see a relatively favorable setup for a cooler period in the southeast U.S. into the Mid-Atlantic to start December. Warmth probably persists in the Central and Western U.S., however. At this point, December looks like the best month of winter to see any kind of durable colder periods in the Eastern U.S., though the month as a whole probably doesn’t feature sustained cold, and it could be volatile at times.
To all of my readers, I wish you a very happy, .safe, and blessed Thanksgiving! Remember to thank God for the blessing of living in the greatest country in the world. God Bless you all!
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