Whitewash. The Energy Report 02/08/2024

The impact of the BP Whiting Indiana refinery outage was already felt in yesterday’s Energy Information Administration (EIA) weekly status update and it will be felt at gas and diesel pumps around the nation, especially in the Midwest. We saw crude supplies rise in part because of the drop-in Midwest refining activity and that could happen again next week as it looks like Whiting could be down in an extended outage. We have reports of ongoing flaring and Reuters reports that it could be shut for up to three weeks for inspections of units and piping following a Feb. 1 plant-wide power outage, said people familiar with operations on Wednesday.

The big price spike in diesel and gas has already happened and supplies to stations and jobbers are being rationed. The impact of the refinery helped solidify big jumps in the crack margins for both diesel supply and gasoline yesterday.

The EIA reported that crude supply increased by 5.5 million barrels last week but the corresponding drop in gasoline of: -3.1 MMB and Distillate: -3.2 MMB.

This comes as demand is still very strong and showing no signs of a US recession. Total demand hits 20.277 million barrels a day! Gasoline demand came in higher at 8.807 million barrels a day and diesel demand was up hitting 3.817 million a day. Total products fell -4.5 MMB.

Global demand is also rocking and we are seeing supplies tighten. Jodi reports that India’s crude inventories fell by 6.2 million barrels.

China demand has been a big worry but there are signs that oil demand in China may bounce back. They also put in a new finance guy as China’s ruling communist party appointed central bank Deputy Governor Pan Gongsheng as the bank’s party secretary on Saturday, a move the Wall Street Journal said would be a prelude to becoming governor. But now Energy Tidbits is reporting that the Spring Festival travel rush for 2024 – the world’s largest annual human migration – officially starts on Friday, and is expected to set a new record of 9 billion passenger trips during the 40-day travel peak”. A rebound in Chinese demand will tip the globe into a supply deficit and is another reason why oil is bottoming, and crack spread are rocking.

Well, the back in the ministration is considering putting a ban on new LNG projects and banning more places for US drilling offshore. China and Russia are working together to secure energy. Kremlin Aide: Putin and China’s President Xi discussed joint energy projects.

Oil prices may also be getting a boost on the fact that Israel rejected the Hamas ceasefire proposal which should not have been a surprise. It’s almost amazing how the oil market reacted to those headlines selling off when the ceasefire proposal was first announced and bouncing back afterward.

What’s going on the sea of reality is a tightening market situation. We continue to recommend to be hedged and those that have hedged are going to look pretty good here in the coming weeks. The supply side squeeze looks like it’s coming and while it may have been delayed by a week or two, it definitely looks like we’re on track for new highs across the board.

Natural gas prices continue to plummet with concerns about rising production at a time when demand is weak and is causing the sell off. We’re also seeing downward pressure because of the pause on LNG exports which is raising significant questions about the future of the US oil and gas industry. Biden’s goal may be to put small producers out of business and if that’s his goal, he is succeeding.

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