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
Oil prices still can’t turn the bullish corner as the Biden administration makes it clearer that Iran will not face any consequences for funding one of the most horrific terrorist attacks on civilians in recent memory carried out by Iran’s favorite terror group, Hamas. Instead of cracking down on Iran’s oil revenue, they have allowed it to flourish as they tried to appease the Iranian regime. The Biden administration now has decided to extend a sanctions waiver that will allow Iran to access 10 billion dollars in return for providing electricity to Iraq. This move makes it clear that the Biden Administration is more concerned about upsetting global energy prices than they are in stopping Iran’s funding of terror around the globe. It also means that Iran’s oil exports, which hit another 4-year high this week, will continue to flow.
It also means that groups like Hamas, Hezbollah and the Houthi rebels will get all the funding they need to spread their warped view of the world and their total disregard for humanity. Yet the Biden team does not see terror, nuclear war or global insecurity as a big threat.
Biden is fixated on the ridiculous dogma of the green dollar-grubbing extremists that climate change is the biggest threat to humanity. Even as the world is facing wars in Europe and the Gaza Strip our cities are disintegrating into crime-ridden hell-holes yet Biden can only see a threat coming from the climate. He doubled down yesterday by saying, “You know, I’ve seen firsthand what the reports made clear: the devastating toll of climate change and its existential threat to all of us. And it is the ultimate threat to humanity: climate change.” So, because he believes that then in his mind it is ok to give Iran more money so they can help fund other unspeakable terror acts.
It is also why Biden cut a terrible trade deal with China in a desperate hope that they will reduce their fossil fuel use and a promised crackdown by China on Chinese companies that manufacture and export chemical precursors to fentanyl.
The Biden administration is extremely sensitive to rising record deaths by fentanyl that have mainly surged because of Biden’s open border policies. Now he says he is willing to drop sanctions on China buying US technology which will allow China to again steal our technology and increase its ability to become a threat to US national security. So, the US gets a promise that maybe, just maybe, they will crack down on fentanyl production and reduce their fossil fuel use and in return they get access to some of the best technologies in the world. Seems fair.
Hedge funds continue to bet that even though demand is strong and supplies are tight, Biden will allow Iran’s oil to flow no matter what they do. China’s oil demand is still at a record, and it shows no sign of slowing after their Industrial Production numbers in October rose 4.6% beating expectations.
John Kemp at Reuters believes that hedge funds are playing a game of chicken with OPEC writing that, “Oil traders turn bearish, daring OPEC⁺ to cut again. Kemp points out that, “Hedge funds and other money managers for another week sold the equivalent of 57 million barrels in the six most important futures and options contracts over the seven days ending on Nov. 7. Fund managers have been sellers in five of the most recent six weeks reducing their combined position by a total of 331 million barrels since Sept. 19. Kemp writes, “The sharp run-up and collapse of calendar spreads is characteristic of an end to the squeeze on deliverable supplies. With the squeeze apparently over, fund managers had become much more bearish about WTI prices. Bearish short positions in the premier NYMEX WTI contract were boosted to 96 million barrels on Nov. 7 from just 20 million at the start of October. Bearish short positions were outnumbered by bullish long ones by a ratio of just 1.62:1 last week down from 6.15:1 at the start of October. But Kemp warns that, “the concentration of short positions has increased the probability of a sharp reversal in the previous downward price trend when funds realize their profits.”
Well, oil failed to give its signal as it again just barely closed below the 10-day moving average turning point. Today that number is 7838. If we close above that number, look for a downtrend reversal. If not, the downside should be limited from here.
The expiration of the December crude oil options is today and that of course could be a reason for more volatility but we also get the new and improved Energy Information Administration weekly status report. The EIA took a week off to try to fix their data and this week we get two weeks of data for the price of 1. It will take traders maybe a couple of weeks to assess the impact on the market as it is related to the new way the EIA is going to report data.
The American Petroleum Institute report was pretty neutral. API showed crude up 1.335 million (exp. +1.4 million). Gasoline +195,000. Distillates -1.022 million. Cushing +1.136 million.
The Energy Information Administration put out a report that said that the global natural gas market is well supplied for winter, but risks remain. The EIA says that, “relatively full natural gas inventories in the United States and Europe and expanded global liquefied natural gas (LNG) export and import capacity have improved the likelihood that global gas supply is sufficient to meet demand in the 2023–24 winter season (November–March), according to our recently released Winter 2023–24 Global LNG Analysis. However extreme weather and supply interruptions both pose risks to this balance.
Expanded global LNG export and import capacity will make more natural gas available this winter season. We expect approximately 4.0 billion cubic feet per day (Bcf/d) of additional and returning LNG export capacity to be available during winter 2023–24. The return to service of Freeport LNG in the United States has already boosted global LNG exports by 2.0 billion cubic feet per day (Bcf/d) so far this year. We also estimate global LNG import capacity has expanded by 13% (18 Bcf/d) so far this year in both Europe and Asia, and we expect more import projects to enter operation in Germany and China this winter.
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