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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

OPEC Plus is having their meeting today and based on what we are hearing, they seem to be leaning towards a lower-than-expected production cut. It seems higher prices for oil suits the group well as it thinks that with a lot of global market stimulus, they can allow oil prices to move higher without damage to the economy.

OPEC Plus will not see opposition from the Biden administration whose quite clearly in favor of higher oil and gas prices. Yet their desire to make oil and gas more unaffordable may come with a downside for the US economy as the administration now has to face the threat of rising inflation and interest rates in a struggling Covid 19 economy. Oil supplies have swung from the biggest oil glut in history to potentially the tightest market we have seen since the beginning of the millennium and could get out of control and sink the Biden economy. The Biden administration is willing to sacrifice jobs and the economy to forward their progressive agenda but if they don’t change, it increases the odds that we are headed into a recession.

The OPEC+ Joint Ministerial Monitoring Committee (JMMC) popped oil prices after they failed to meet without any recommendations on oil production. That means that instead of raising output there is a possibility that OPEC will stand pat and just roll over its current cuts which more than likely would send oil prices higher. The consensus is that the group will raise output by 500k. At this point, it is even unclear as to whether Saudi Arabia will reduce their voluntary Saudi Arabia 1 million barrel a day production cut. So stay tuned. Libya though, as a side note, has seen its production increase to 1.3 million barrels a day.

Oil prices also had to price in the fallout from the Texas energy crisis. Apologists for wind and solar energy continue to try to point fingers at oil and gas for the problems. Yet for wind and solar, they are the power source that is not sustainable when weather conditions are adverse.  The impact of the storm was seen when we saw the biggest gasoline supply drawdown since the 1990s and on the flip side the biggest crude oil supply increase ever. The EIA reported that U.S. commercial crude oil inventories increased by 21.6 million barrels from the previous week. At 484.6 million barrels, U.S. crude oil inventories are about 3% above the five-year average for this time of year. Total motor gasoline inventories decreased by 13.6 million barrels last week and are about 3% below the five-year average for this time of year. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories decreased by 9.7 million barrels last week and are about 2% below the five-year average for this time of year.

Still, under President Trump, according to the Energy Information Administration, the United States installed more wind turbine capacity in 2020 than in any other year even though the US was not in the Paris Climate accord that globalists and billionaires fawn over. The EIA said that in both 2019 and 2020, project developers in the United States installed more wind power capacity than any other generating technology. According to data recently published by the U.S. Energy Information Administration (EIA) in its Preliminary Monthly Electric Generator Inventory, annual wind turbine capacity additions in the United States set a record in 2020, totaling 14.2 gigawatts (GW) and surpassing the previous record of 13.2 GW added in 2012. After this record year for wind turbine capacity additions, the total wind turbine capacity in the United States is now 118 GW. The impending phaseout of the full value of the U.S. production tax credit (PTC) at the end of 2020 primarily drove investments in wind turbine capacity that year, just as previous tax credit reductions led to significant wind capacity additions in 2012 and 2019. In December 2020, Congress extended the PTC for another year.

The Biden war on oil and gas could create a big spike in natural gas prices this summer. The EIA reported that, “U.S. natural gas production—as measured by gross withdrawals—averaged 111.2 billion cubic feet per day (Bcf/d) in 2020, down 0.9 billion Bcf/d from 2019 as a result of a decline in drilling activity related to low natural gas and oil prices in 2020. The 2019 record-high increase in natural gas production led to higher volumes of natural gas in storage and lower natural gas prices. Beginning in March 2020, warmer-than-average weather along with the effects of the responses to COVID-19 drove down natural gas demand and further reduced prices. The lowest average monthly U.S. natural gas production volume was in May 2020 at 106.4 Bcf/d. By December 2020, natural gas production had increased to 113.0 Bcf/d.

Biden’s disjointed policy in the Middle East is getting more complicated. Reuters report Yemen’s Houthi forces fired a cross-border missile at a Saudi Aramco facility in Saudi Arabia’s Red Sea city of Jeddah, a Houthi military spokesman said on Thursday, but there was no immediate confirmation from Saudi authorities. Saudi Aramco, whose oil production and export facilities are mostly in Saudi Arabia’s Eastern Province, more than 1,000 km (620 miles) across the country from Jeddah, did not immediately respond to a Reuters request for comment.

The bull market in oil is alive and well. If OPEC gives us a break, look to lock in hedges. Call Phil Flynn For Details!

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It’s time to call to get my Daily Trade Levels at 888-264-5665 or email me at pflynn@pricegroup.com.


Phil Flynn

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