No Reserve. The Energy Report 01/18/2023

Oil prices are surging because we have no reserves. Not only is the Strategic Petroleum Reserve tapped out, global spare production capacity is as thin as it has been in years. Now the reality of China’s reopening is starting to sink in, not to mention the upcoming February 5 ban on Russian oil. Even the International Energy Agency (IEA) says that global oil demand will reach a record high averaging 101.7 million barrels a day despite their previous calls for the world to stop investing in fossil fuels. No wonder the United States Energy Czar John Kerry is desperately begging the world to spend the more on failed energy policies which is kind of embarrassing.

The Strategic Petroleum Reserve release madness is coming to an end. For the first time since September 2011, we did not release one drop of oil from the SPR. While SPR releases may have lowered prices in the short term, we are just beginning to pay for it in the long term.

SPR releases further discouraged investment and now Saudi Aramco’s chief executive officer, Amin Nasser, is warning that global spare oil production capacity is too low. At the World Economic Forum in Davos Switzerland, Mr. Nassar said that he’s expecting to see demand from China pick up and that the demand for jet fuel, a major demand source for oil, is now around 1,000,000 barrels a day below pandemic levels and it’s picking up.

We also have global leaders focused on climate craziness, spending billions of dollars making the world less energy secure and raising the cost of energy with the futile dream that they can somehow save the planet. Remove all this talk about China leading the energy transition, the reality is that they’re building more coal plants producing record amounts of coal than importing record amounts of coal.

In the United States, we’re talking about banning natural gas which is the cleanest form of fossil fuels and the obvious bridge fuel to a cleaner energy future. The reality is that if we want to reduce greenhouse gas emissions, one of the major steps we could take is just start moving towards nuclear power but we don’t hear a lot of talk about nuclear power and Davos Switzerland.

We do hear a lot about spending money. Mish Talk pointed out that our energy czar John Kerry only knows one way to do anything. Spend other people’s money. Kerry said, “The state of the union is coming up. The president’s got to, and you know I think will, because he believes this, we gotta move this. Because that’s the only way we can keep 1.5 degrees alive.” “So how do we get there? The lesson I’ve learned in the last few years, and I’ve learned it as a secretary and learned it since reinforced in spades, is money. money, money, money, money, money, money.”

What about the responsibility for the money that’s already been spent. Why are we not seeing a full drop in greenhouse gas emissions? Why is Europe flipping back to burning more coal why are we mortgaging our futures on interruptible power sources that will do nothing to lower global temperatures. John Kerry can have a dream but if the dream is not based in reality throwing all the money in the world at it won’t solve a thing.

Oil is going for its 9th day in a row of closing higher after the New Year’s crash. People that were betting on the fact that China’s reopening would stop because of concerns about rising covid cases and recession fears, are being somewhat alleviated. Now the market has to worry about the February 5 ban on Russian oil imports.

Oil products are also getting a strong boost this morning. Strained refining capacity it’s going to keep upward pressure on prices. While Exxon is talking about retooling its refinery to increase capacity to produce more diesel which is going to be welcome in the short term, the markets are more concerned about a refinery fire that happened yesterday. Gray News reported that three people have been injured in a fire Tuesday at Phillips 66 Borger Complex in Hutchinson County, a refinery complex north of Amarillo, Texas. According to the City of Borger/Hutchinson County Office of Emergency Management, at around 10:15 a.m., crews responded to a fire that started at the complex. All personnel on site have been accounted for and three injured individuals are receiving appropriate medical attention, the city of Borger said in a social media post.

The Energy Information Administration said the US Bakken oil production increased by 20,000 barrels a day to 1.226 million barrels a day versus a 21,000 barrel a day rise in January. Eagle Ford production in the United States increased by 4200 barrels in February to 1.213 million barrels versus 4000 barrel rise in January. In February US Permian basin oil production increased by 30,000 barrels to 5.635 million barrels a day versus the 36,000 barrel a day rise in January. The EIA says the total shell production in the United States increased by 77,000 barrels a day in February reaching 9.376 million barrels per day versus 86,000 barrel a day rise in January.

Natural gas is getting the pop-down reports of some progress with the Freeport LNG export terminal as well as some potential for colder weather. The key for natural gas is going to be if winter decides to make a comeback. Stay tuned to Fox Weather.

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

Phil Flynn

The PRICE Futures Group

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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