Dereliction Of Duty. The Energy Report 03/14/2024

Some might say that The International Energy Agency (IEA) has been derelict in its duty to secure energy security for Europe because they have been taken over by a green energy agenda.

Not it appears they must acknowledge they were wrong about stopping investments in fossil fuel but today, they have to acknowledge what I have been saying for months and that is that hat the world is headed into a crude oil supply deficit supply deficit.

Oil price broke back above $80 a barrel WTI after the IEA that the global oil market will face a supply deficit having to backtrack on their previous forecast of a supply surplus. As I have written many times in the past, the IEA has constantly underestimated demand and overestimated production in some cases to make their green energy models work and to try to make them look somewhat feasible, when it’s not.

The IEA had to change its global oil demand growth forecast by 270,000 barrels a day and now says that the world will see growth of 1.7 million barrels a day which will be a new record high.

The IEA says that “Global oil demand is forecast to rise by a higher-than-expected 1.7 mb/d in 1Q24 on an improved outlook for the United States and increased bunkering. While 2024 growth has been revised up by 110 kb/d from last month’s Report, the pace of expansion is on track to slow from 2.3 mb/d in 2023 to 1.3 mb/d, as demand growth returns to its historical trend while efficiency gains and EVs reduce use.”

Maybe the International Energy Agency hasn’t been paying attention to what’s been going on in the electronic vehicle market. Pinning your hopes that electronic vehicles are going to reduce demand growth significantly doesn’t match up with the reality that we’re hearing in the real electronic vehicle world. EV sales s are horrible and companies are losing massive amounts of money on the electronic vehicle. Not only did Apple abandon its car yesterday, but it was also reported that Porsche is abandoning its electric vehicles.

The IEA National Energy Agency blamed OPEC, and they say that they expect OPEC will continue their cuts through the end of 2024. The IEA blamed OPEC saying they changed the assumptions and shifted our implied balance into a slight deficit rather than a hefty build in last month’s report.

The IEA put world oil production is projected to fall by 870 kb/d in 1Q24 vs 4Q23 due to heavy weather-related shut-ins and new curbs from the OPEC+ bloc. From the second quarter, non-OPEC+ is set to dominate gains after some OPEC+ members announced they would extend extra voluntary cuts to support market stability. Global supply for 2024 is forecast to increase 800 kb/d to 102.9 mb/d, including a downward adjustment to OPEC+ output.

The IEA also had to acknowledge another thing I have been warning about and that is the tight global oil supply despite the historically warm winter that we had in many places even as they try to spin it to look better.

The IEA said that Global onshore oil stocks fell a further 38 mb last month, taking the drawdown since July to 180 mb, according to preliminary data.
Over the same period, oil on water surged. Trade dislocations from the rerouting of Russian barrels and more recently due to unrest in the Middle East, have boosted oil on water by 115 mb. In February alone, oil on water surged by 85 mb as repeated tanker attacks in the Red Sea diverted more cargoes around the Cape of Good Hope. At nearly 1.9 billion barrels as of the end of February, oil on water hit its second-highest level since the height of the COVID-19 pandemic.

The bottom line is that the International Energy Agency tried to sell us a bill of goods and now they have to admit they were wrong, They weren’t wrong by a little bit by a long shot. For years I have warned about the International Energy Agency and the loss of their mission their fixation on the energy transition had them lose their. Direction sadly Matt blow to their credibility it’s going to take some time to repair. When I first started to point this out I seemed to be in the minority but more and more people in the oil industry are starting to take the International Energy Agency predictions with more skepticism than they have before. It’s a shame when we used to look to the International Energy Agency as a non-biased reporting agency and now have to realize that they have an agenda and the agenda sadly is energy security for Europe.

Today’s breakup of $80.00 is significant especially if we can hold it into the close above $80.00 a barrel should induce short covering his hedge funds continue to favor the short side of the market.

.And after yesterday’s Energy Information Administration (EIA) report showed that US petroleum inventories (crude, SPR, refined products) are at the lowest point since end-2022 the market is starting to face up to a new reality. The reality is that the expected crash in global oil demand is not going to happen. They also have to face up to the reality that EV’s are not going to cut into gasoline demands nearly as badly as many had predicted.

US production had fallen to 13.1 million barrels a day in part because (EIA) may have been over-reporting it in the first place, The EIA  said that this week’s domestic crude oil production estimate incorporates a re-benchmarking that decreased estimated volumes by 177,000 barrels per day, which is about 1.3% of this week’s estimated production total.

The EIA   that gasoline supplies falling significantly is going to create further challenges for US refiners if they are going to rise to the occasion to meet the demand which is much better than the International Energy Agency has been telling them it would be.

The EIA said that “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.5 million barrels from the previous week. At 447.0 million barrels, U.S. crude oil inventories are about 3% below the five-year average for this time of year. Total motor gasoline inventories decreased by 5.7 million barrels from last week and are about 3% below the five-year average for this time of year. Both finished gasoline and blending components inventories decreased last week. Distillate fuel inventories increased by 0.9 million barrels last week and are about 7% below the five-year average for this time of year.”

Gasoline demand rose again last week as supply tightened,  Gas demand week over week hit  9,044 million barrels a day up 30,000 barrels from the week before.

The EIA said that total oil product demand based on products supplied over the last four-week period averaged 19.9 million barrels a day, up by 1.0% from the same period last year.

Over the past four weeks, motor gasoline product supplied averaged 8.7 million barrels a day, down by 1.3% from the same period last year but up over last week.

Distillate fuel product supplied averaged 3.7 million barrels a day over the past four weeks, up by 0.5% from the same period last year.

Jet fuel product supplied was up 2.0% compared with the same four-week period last year.

Natural gas producers are in bad shape with historically low prices and spot prices that have gone negative. The question is will we be able to cut back production enough to save some of the producers,.

The EIA said that Winter storms have disrupted U.S. natural gas production ›

Over the last four winters, winter storms Uri (February 2021), Elliott (December 2022), and most recently, Heather (January 2024) interrupted weekly U.S. natural gas production by more than 15 billion cubic feet per day (Bcf/d), according to daily estimates from S&P Global Commodity Insights. These declines were the largest interruptions to U.S. natural gas production during the past four years.

Although the impacts of these disruptions appear more muted over a month, winter storms Uri and Elliott still drove declines in monthly average natural gas production of 3 Bcf/d to 7 .

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