About The Author

Phil Flynn

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

As the market prepares for the upcoming Easter holiday and with the oil market closed on Good Friday, a shocking build in crude supply might be a bit hard to shake off. The American Petroleum Institute (API) reported a massive 9.337-million-barrel increase in crude supply along with a much larger-than-expected 2.392-million-barrel increase in crude oil supply. The surge in crude supplies would be welcome news for refiners but it does have people questioning how we could have seen such a large increase in just one week.  We do know that refinery maintenance issues helped increase supplies at Cushing, OK. We know that ongoing refinery maintenance issues could be partly to blame. Regardless, the increase in size was stunning just to say the least.

Oil exports and oil production are going to be monitored very closely if it weren’t for the fact that we saw a very large 4.437 million barrel drop in gasoline inventories, the market might have fallen apart on light volume that gets lighter as we get closer to the end of this shortened trading week. Distillates barely moved the needle, increasing by just 531,000 barrels. Today the market is going to analyze the Energy Information Administration report to see if this build is an aberration or if there’s something in the data that suggests a significant drop in demand.

We do know that consumer confidence, according to yesterday’s data, took a big hit. The consumer confidence board reported that the consumer confidence index fell to 104.7 this month from a revised 104.8 (originally106.7) in February and below market expectations. Consumers feeling the heat from inflation not only in rising gasoline prices but also at the grocery store are raising concerns that they may pull back when it comes to driving vacations and discretionary spending. Gasoline demand is going to be watched very carefully because if it drops, it means to consumers have hit a point where they need to pull back.

Even Russia’s commitment to cut production to 9 million barrels a day by June didn’t seem to have a lasting impact on prices. Still, the reduction in Russian oil production combined with reduced refining capacity should continue to keep the squeeze on supplies in Europe and globally. This comes as increased sanctions on Russia lead to payment delays. Reuters is reporting that, “Russian oil firms face delays of up to several months to be paid for crude and fuel as banks in China, Turkey and the United Arab Emirates (UAE) become more wary of U.S. secondary sanctions, eight sources familiar with the matter said. Payment delays reduce revenue to the Kremlin and make them erratic, allowing Washington to achieve its dual policy sanction goals – to disrupt money going to the Kremlin to punish it for the war in Ukraine while not interrupting global energy flows.”

Going into the Easter holiday we are seeing gasoline prices that are higher than they were yesterday, higher than they were a week ago, higher than they were a year ago. Today gasoline prices are clocking in at $3.53 .5 per gallon. That is up two cents from a week ago, 22 1/2 cents from a month ago and about a dime higher than they were a year ago. The trend of falling gasoline supplies needs to be reversed. It’s going to be interesting to see if there are any signs that that will happen in the Energy Information Administration report.

The market is trying to assess its supply chain issues when it comes to the tragic Francis Scott Key bridge collapse in the port of Baltimore. Close Point LNG said that their operations are going to continue as normal as their facilities were south of the bridge collapse therefore their exports will not be impacted. Car manufacturers, mainly Mazda, is going to have significant supply chain issues until the port is reopened. The port of Baltimore is the major import and export point for many automakers especially some of the higher end brands. It is a major hub for Domino sugar and some of their products also could be harder to find.

Fox News is reporting that safety investigators will probe whether dirty fuel contributed to Francis Scott Key Bridge collapse. They write that, “A safety investigation into the Francis Scott Key Bridge collapse in Baltimore, Maryland, will include whether contaminated fuel was a factor in a cargo ship losing power and crashing into the bridge. Investigators had not boarded the ship, a 948-foot-long container ship called the Dali, as of late Tuesday while it remained stuck on a pillar of the collapsed bridge, and the vessel could stay there for weeks. Rescue crews spent much of Tuesday searching for potential survivors, but officials announced that the search and rescue had been turned into a recovery operation.

Fox News said that, “blackouts at sea are uncommon, but they do happen and have long been viewed as a major accident risk for ships on the water. One cause of ship blackouts is contaminated fuel that can create problems with its main power generators, said Fotis Pagoulatos, a naval architect. He said a complete blackout could result in a ship losing propulsion and that smaller generators can kick in, but they are unable to carry all the functions of the main ones and take time to start.

The Wall Street Journal reports that “The owner of the Domino Sugar refinery at Baltimore’s port says the plant has six to eight weeks of raw sugar stockpiled at the facility and that it expects no short-term disruptions to its operations from the bridge collapse blocking the mouth of the harbor. The refinery, which boasts the last working smokestack on Baltimore’s increasingly residential waterfront, began operations in 1922. A spokeswoman for Domino owner ASR Group said a ship is currently unloading raw sugar at the refinery’s dock and another ship finished unloading on Monday.”

Natural gas continues to be one of the cheapest hydrocarbons on the planet. It’s good news for the industry that the Cove Point LNG export terminal is still operational because they really can’t afford to see anymore export terminals shutdown. The truth is that natural gas continues to be a bridge fuel for any energy transition and maybe that reality is starting to dawn on people. Even people in places like Berkeley CA..

The AP reports that, “The city of Berkeley, California, has agreed to halt enforcement of a ban on natural gas piping in new homes and buildings that was successfully opposed in court by the California Restaurant Association, the organization said. The settlement follows the 9th U.S. Circuit Court of Appeals’ refusal to reconsider a 2023 ruling that the ban violates federal law that gives the U.S. government the authority to set energy-efficiency standards for appliances, the association said in a statement last week. “While the Ninth Circuit’s ruling renders this particular ordinance unenforceable, Berkeley will continue to be a leader in climate action,” Berkeley City Attorney Farimah Faiz Brown said in an email to The Associated Press.

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Call to get signed up for my special updates and the Daily Trade Levels. Call Phil Flynn at 888-264-5665. Email pflynn@pricegroup.com.



Phil Flynn

Senior Market Analyst & Author of The Energy Report

Contributor to FOX Business Network

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