Demand Resurrection. The Energy Report 10/28/2022

Once again, the death of oil demand in the US may be greatly exaggerated. OK, I know I’ve used that before but it’s apropos. Oil markets look poised to close higher on the week as yesterday’s US gross domestic product number seems to throw water on the argument that U.S. oil demand is going to crater.

Even though consumer spending was disappointing, the overall numbers showed that the GDP in the US rose 2.6%, beating the estimate of 2.3%. Consumer spending only increased by 1.4% and that was down from 2% in the second quarter. Yet even with that drop in consumer spending, the flip side is that if the economy is still growing then that means that the oil demand will most likely grow as well. So, unless the economy hits a brick wall before the cold weather sets in, we’re facing winter with some of the tightest supplies that we have seen in a generation.

Oh sure, you can point to commercial inventories and say look how high they are compared to where they were just a few years ago but if you consider the fact that we’ve drained our Strategic Petroleum Reserve, the picture doesn’t look at all that encouraging. We expect that we’re going to start to see crude oil supplies start to draw substantially in the coming weeks as we start to hit the high winter demand. And while the market still has a little trepidation from really breaking out higher in the oil market, we think it’s only a matter of time before it does.

How did we get in this pickle. Part of the problem has been the underinvestment in the fossil fuel industry. As you know I’ve been complaining about this for many years. Short-sighted predictions about so-called peak demand, the movement toward the CESG movement and the demonization of fossil fuel consumption has set the stage for years if not decades of higher oil and gas prices. There had been some hope of turning back from this energy crisis when President Trump came in with his pro-American oil and gas agenda. Now, even though the world is in a major energy crisis, we’re seeing raging inflation from the enablers of this global energy crisis which has caused inflation and geopolitical instability. And still they want to double down on this madness.

The International Energy Agency, as I have said before, has become a shill for green energy and continues to rally against fossil fuels even though their previous predictions about global supply and demand have been proven to be wrong time and time again. The agency continued to feed European governments with bad data. The IEA over reported global oil production and dramatically underestimated demand losing 200 million barrels of oil in their data. They now want to tell us that even though it’s obvious that the green energy movement is failing on every front, they want to double down on it and not use the current energy crisis as an excuse to continue to spend trillions more dollars on green energy projects that so far have done nothing to reduce greenhouse gas emissions globally. The IEA claims that the energy crisis is not a green energy crisis but a fossil fuel crisis.

Yesterday, the International Energy Agency (IEA) released its 2022 World Energy Outlook (WEO), incorrectly claiming, “that accelerating investment in clean energy and efficiency, not new fossil fuels, is the answer to both climate and energy security crises. In a marked shift for the IEA, WEO 2022 sees the outlook for fossil gas deteriorating across all scenarios as a result of the current energy crisis cementing an economic case against gas expansion, on top of the clear climate case. This year’s WEO reaffirms the IEA’s 2021 policy conclusion that new oil and gas fields and coal mines are not needed in a world staying below 1.5°C of warming. The IEA also emphasizes that new fields will not alleviate current volatility and instability in fossil fuel markets, given a four-year lag time, on average, for new upstream fields to move from approval to initial production.

The IEA clearly states, “No one should imagine that Russia’s invasion can justify a wave of new oil and gas infrastructure in a world that wants to reach net zero emissions by 2050.” The IEA is discouraging investment in fossil fuels. This is ridiculous and not in line with their true mission to secure energy. The case can be made where that argument of if there was any evidence that the trillions and trillions of dollars that have been spent over the last 30 years to reduce greenhouse gas emission has made any real difference but if you do the math and if you look at the percentage of alternative energy around the globe, it has not.

At least one company is responding to the global tightness of distillate fuels. S&P global reported that PBF Energy has restarted several units at its 100,000 b/d Paulsboro, New Jersey, refinery that were idled during the pandemic in a bid to support low Atlantic coast distillates inventories. A reformer and two hydrotreaters were restarted at Paulsboro to produce jet fuel and ultra-low sulfur diesel (ULSD), the company said in a call with analysts today for its third quarter earnings. The company did not say when the units came online. In April PBF said it was restarting a naphtha reformer at Paulsboro. The company said rebuilding Atlantic coast inventories, particularly for distillates, needs to be a priority as current stocks are 45pc below the five-year average. Distillate markets and corresponding diesel prices are being closely watched going into the winter season. The low inventories are creating some concern among regional heating oil distributors who are limiting early sales to customers to avoid later shortfalls. Some refiners have suggested the government waive fuel specifications on ULSD as one possible policy to rebuild inventories and lower prices.

It’s going to be a big day Sunday at the Money Show. I’m going to start with an appearance on Fox and Friends with Rachel Campos Duffy in the morning. Then I am going to be speaking at the opening ceremonies as well as doing a quick master class for you all to take part in! Make sure you stop by and say hello! It is going to be an incredible show! If you can’t make it just stay tuned to the Fox Business Network because they are the only network in the United States and in the world that’s truly invested in you. Inflation is raging, commodity markets are hopping! It’s time that you open your trading account. I can help with that. Just call Phil Flynn at 888-264-5665 or you can e-mail me at pflynn@pricegroup.com. I’ll even send you the very popular Phil Flynn Daily Trade Levels!