Dirty Oil. The Energy Report 01/13/2023

Oil is on an upward track as volume comes back on expectations of record-breaking Chinese oil demand as well as expectations that the Fed will only raise rates by a quarter point in February. That is because of signs in the CPI that inflation may be easing. That’s throwing fuel on the bullish fires even as the Biden administration backtracks from talking about a natural gas stove ban.

What good is it to get rid of natural gas stoves if we continue to import more oil from Venezuela? Dirty Venezuelan oil from a dictator! Environmentalists must be outraged. The Biden administration is misguided when it comes to saving the environment. All their talk of the green energy transition has not made the world cleaner. The war in Ukraine has unmasked the sheer stupidity of the green energy transition. Now the embracing of Venezuela to replace Russian oil is crazy and counterproductive to its efforts to reduce greenhouse gas emissions. Yet the US needs to have heavy oil to meet diesel demand. The Biden administration has no problem with violating its principles when they fear that a price increase can hurt them politically.

In a Wall Street Journal exclusive it is being reported that, “In what are preliminary talks between ConocoPhillips and national oil company Petróleos de Venezuela SA, the two sides are looking at a proposal that could allow the Houston-based company to load, transport and sell Venezuela’s oil in the U.S. on behalf of PdVSA, as the state oil company is known. This would give ConocoPhillips a chance to recover the money it lost in the country and help the U.S. meet its energy needs, the people said.” Oil is also waking up to the reality that China is going full steam ahead with its reopening and that is going to have a major impact on tightening the global supply of oil.

Bloomberg News reports that, “Chinese oil consumption is expected to hit a record this year as the world’s biggest importer leaves the straitjacket of Covid Zero behind, bolstering the global demand outlook and aiding prices. Daily demand — which contracted last year —  will climb by 800,000 barrels a day in 2023, according to the median estimate of 11 China-focused consultants surveyed by Bloomberg News. That would take consumption to an all-time high of about 16 million barrels a day, the survey showed.”

I think that China’s demand will be triple the average estimate of demand. That should keep oil on a strong path into spring. That also means we had better enjoy these low gasoline prices while you can.

China’s been importing a lot of oil and a lot of that has been coming from the US strategic Petroleum Reserve. Biden administration has used our SPR to try to influence its political poll numbers and give Americans a sense that they are doing everything they can to bring down oil prices even though their policies as far as drilling moratoriums, embracement of the SG movement and other things has actually caused massive underinvestment in the oil and gas sector that will lead to years of pain for US consumers.

Reuters is reporting, “The U.S. House of Representatives overwhelmingly passed a bill on Thursday to ban releases of oil from the U.S. Strategic Petroleum Reserve from being exported to China, though the measure faces an uncertain future in the Senate. The bill passed 331-97 in the House, which Republicans took narrow control of this month. All of the “no” votes came from Democrats.”

Now that Biden has drained the SPR, the lack of strategic barrels is gonna start showing up as far as drawdowns in global inventories in the next couple of weeks. The Biden misuse of the Strategic Petroleum Reserve may cause a spring price spike in oil and gasoline. When the market gets used to a steady stream of supply that suddenly ends, there’s always a backlash.

Natural gas prices are trying to come back from the dead even after the Energy Information Administration reported a very rare 11 BCF injection in the month of January. While the injection does little to offset the previous week’s incredible drawdown in inventories, the reality is that it reflects just how warm early January was. Still, if you look at the big picture on inventories, stocks are still 140 BCF less than they were a year ago at this time and 40 bcf below the five-year average. Now with some winter forecasts coming back into play, we could actually see a pretty good recovery in the natural gas price. Longer term the uncertainty about the Freeport LNG export terminal is going to create a few other problems.

I hope everybody has their best weekend ever! Keep watching the Fox Business Network!

Call Phil Flynn to open your trading account today! Call 888-264-5665 or email me at pflynn@pricegroup.com.