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
Omicron is still wrecking havoc with the global economy and global oil demand. Reports that China is telling people in the Xian province that they have to stay indoors is not helping matters. That is particularly true after more than 2,400 flights were canceled by U.S. airlines as covid-19 reduced the number of available crews while several cruise ships had to cancel stops according to reports and others adjusted their holiday plans. Data tracker FlightAware.com shows U.S. flight cancellations exceeded 2,400 in just the past 48 hours. MarketWatch is reporting that airline stocks are broadly lower as covid cases spike and has led to even more like cancellations.
Still, we should get some back door support from reports that the Chinese central bank pledged more stimulus for the “real economy”. China said it will make monetary policy more forward-looking and targeted, amid expectations of easing as a property-sector slowdown saps economic growth according to Bloomberg. We may also get some support from the fact that the UK Prime Minister Johnson said he is not expected to introduce new covid limitations.
As China eases the U.S. tightens. Goldman Sachs says they anticipate that the Federal Reserve is going to raise interest rates three times this year starting as early as March. Larry Summers reportedly is taking a victory lap because he warned his democratic counterparts about the risks they were taking by adding to inflation. If covid continues to spread, it’s going to be a difficult balancing act going forward.
Geopolitical risks are still running high. Reports show that President Vladimir Putin said that if NATO does not provide binding guarantees to curtail military deployments in Eastern Europe and bar Ukraine from membership in the alliance, he will be forced to consider a variety of options, including a military response. Putin’s demands are contained in a pair of draft treaties Russia submitted to NATO earlier this month. POLITICO reported that Putin, whose remarks aired on Russian state TV Sunday, expressed concerns about the possibility of missiles being deployed in Ukraine if the former Soviet satellite joins NATO. “We have nowhere to retreat,” Putin said. “They have pushed us to a line that we can’t cross. They have taken it to the point where we simply must tell them: “’Stop!”. When asked about the exact nature of the response he was proposing, Putin said it would “depend on what proposals our military experts submit to me.”
Blockchain is not very energy efficient. That is why I like RaidaTech. Coin Telegraph reports that, “Amid Iran’s energy consumption increased during the winter, local energy authorities have decided to halt operations of authorized cryptocurrency mining centers.
Mostafa Rajabi Mashhadi, chairman of the board and managing director of Iran Grid Management Company (Tavanir), announced that Iran is shutting down crypto mining centers again to reduce liquid fuel consumption in power plants amid decreasing temperatures. Mashhadi said that Iranian authorities took this action to reduce energy consumption last month, The Islamic Republic of Iran Broadcasting reported on Saturday.
Let’s face it, we don’t have a lot of economic reports today and it is unclear how omicron is going to impact oil demand with these shutdowns around the globe. What we do know is that OPEC is watching we believe that OPEC will react f demand stays weak. Overall, we still believe demand is going to be pretty solid even with these lockdowns. The UK is staying firm and with the speed that the omicron variants seem to spread and end, it seems like any lockdowns will be short-lived. U.S. crude oil and natural gas exports could hit a record high this week and that should support prices. Look to buy brakes.
Natural gas gets a pop on winter in Europe and then a bit of a break. Bloomberg reports that European natural gas prices fell for a fourth day as U.S. supplies are expected to bring relief to the tight market and traders weighed both milder weather and risks to demand from the omicron virus variant. Benchmark Dutch front-month gas fell as much as 19% to 90 euros ($101.88) a megawatt-hour, the lowest since Dec. 6. German power for January declined as much as 36% to 220 euros per megawatt-hour as lower gas prices make it less expensive to generate electricity.
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