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
Reports show that 2.4 million b/d of refinery capacity is confirmed shut and a total of 4.4 million b/d of operable refinery capacity. According to S&P Global Platts reports also say that, “Occidental declares force majeure as cold shuts in Permian oil 50% of wind power still down Shell confirms Deer Park, Texas facility has shut down due to unprecedented weather. The most reliable form of energy through this crisis which is natural gas has been hampered because of the inability to heat crude and pipelines because the fact that wind and solar failures have caused a great unbalance to the grid.” For the futures markets in oil and gas and distillate, this is why we are seeing those prices hit 13-month highs.
Yet while the weather is speeding up the process, the reality is that the fundamentals of oil and gas have been bullish. With more vaccine rollouts and global demand rising, we are seeing the market move towards a global deficit situation. The Biden administration is not encouraging investment in any fossil fuels which will help add to the deficit. While OPEC has spare capacity and plans to raise output in April, the trend of the supply curve means that we’ll probably too late to avoid a squeeze.
Besides, Saudi Arabia seems like they are in no hurry to get there. Saudi Arabia’s energy minister Prince Abdulaziz says, “it’s too early to declare victory against the virus” and caution needs to be taken. The football match is still being played, and it is too early to celebrate and declare any victory against the virus. The referee is yet to blow the final whistle,” said the prince according to Reuters.
The $63.00 mark is a big resistance for WTI. We have options expiring on oil! Be on guard for another spike higher! We believe some wounded bears may have to cover. Don’t underestimate the possibility of another leg higher. RBOB gasoline futures are roaring as pump prices should jump 9 to 10 cents a gallon at the pump and maybe more if they can’t get the refineries back online.
March natural gas is above $3.00 and if this cold blast happened a month ago, the would have been above $4.00. Power producers may be forced out of business after these record surges in spot prices.
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