Summer Draws Makes Me Feel Fine. The Energy Report 06/21/2024

Predictions that gas prices would continue to fall seems to be at risk, and a drop in diesel supply is suggesting that the US industrial sector is heating up. Crazy strong demand numbers for ‘other oils’ is lifting overall oil demand expectations and signaling future tightening of oil and product supply in the coming weeks. This comes as the US Oil and Gas Association has a classic calling out of Biden on his fossil fuel hypocrisy.

But before we get to that let’s talk about the sudden resurgence of US oil and gasoline demand. Drivers that have been reluctant to get on the road party being held back from the plague of inflation, started to venture out as demand rose by 346,000 barrels a day last week to a new year high of 9.386 million barrels a day. Still the four-week moving average shows that overall gas demand is still 1% below a year ago.

US gasoline exports to Europe are soaring. Quantum Energy points out that European exporters will have drawn further support from a sharp fall on the Atlantic coast, where stocks fell 2.7 million barrels or 4.5%.

Diesel demand also increased 328,000 barrels a day to 3,977. That seems to reflect data of stronger us manufacturing and Farmers field work.

Also, the demand for those often-forgotten other oils surged from a million barrels a day by a 1.138 million barrels a day to 5009 million barrels a day. Other oils like aviation gasoline, kerosene, natural gas plant liquids and LRGs (except propane/propylene), unfinished oils, other hydrocarbons and oxygenates (except fuel ethanol), aviation gasoline blending components, naphtha and other oils for petrochemical feedstock use, special naphthas, lube oils, waxes, coke, asphalt, road oil, and miscellaneous oils and other fun stuff like that.

That led to draws across the board as EIA reported that “U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 2.5 million barrels from the previous week. At 457.1 million barrels, U.S. crude oil inventories are about 4% below the five-year average for this time of year.

Total motor gasoline inventories decreased by 2.3 million barrels from last week and are about 1% below the five-year average for this time of year. Distillate fuel inventories decreased by 1.7 million barrels last week and are about 8% below the five-year average for this time of year.

Still John Kemp says that, “US Crude oil inventories remain very close to the long-term seasonal average, despite talk of a massive deficit in the global market. Stocks were just -2 million barrels below the prior ten-year seasonal average on June 14 compared with a surplus of +15 million barrels at the same point in 2023.

Of course then you must remember the depleted Strategic Petroleum Reserve that gives that a different look. And while the SPR rarely was tapped, having that in reserve gave oil price a sense of security and a lower risk premium.

Biden is no doubt the most anti-fossil fuel President in history and has slandered and showed disrespect to the US oil and gas industry and its workers despite the fact that the US oil and gas industry is one of the main reasons that the US economy is as strong as it is and serves the American people in many ways that cannot be replaced.

So, when Biden posted a picture of himself walking down the stairs of Air Force One with the caption “The best part of my job is showing up for the American people” The US Oil and Gas Association wanted to point something out to him. They wrote under the Biden’s post that, “Air Force One – two specially configured 747-200Bs are powered by four GE CF6-80C2B1 engines with a thrust rating of 56,700 pounds each.

The fuel capacity of Air Force One is 53,611 gallons of jet fuel which is primarily derived from crude oil – which is produced domestically – thanks to the US oil & gas industry.  So – every time POTUS “shows up” – showing up is made possible – by the members of the US Oil & Gas Association. And he has never once said thank you….”

Well, I know Biden might not thank you, but I thank you! In fact, many Americans who benefit from your investment and innovation, hard work and risk taking to make our world safe, drive our economy and the lives that you are saving today by keeping our homes cool during this heat wave, thank you as well. Keep the Faith.

Natural gas is pulling back as the market thinks that Tropical Storm Alberton will cool off demand. Today we got the EIA Nat gas report at 10,30 Eastern time. Anthony Harrup at the Wall Street Journal wrote that U.S. natural gas inventories likely saw a below-average build last week, further reducing surplus supplies as hot weather across much of the U.S. lifted demand for air conditioning.

Natural gas in underground storage is forecast to have increased by 70 billion cubic feet to 3,044 Bcf in the week ended June 14, according to the average estimate in a Wall Street Journal survey of nine analysts, brokers and traders. Estimates range from an injection of 64 Bcf to an injection of 82 Bcf.

It would be smaller than the five-year average injection for the week of 83 Bcf, and mark a sixth consecutive below-average injection, lowering the surplus over the five-year average from 573 Bcf the week before.

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The Phil Flynn Manic Metals report Friday June 21, 2024

Summer Silver Fun Run

Silver melted up on the summer heat hitting the highest level since June the 6th, Copper popped and dropped on reports of record Chinese copper exports. And while they tried to pull back, weak data out of Europe is causing another potential for an upward run.

Bloomberg reported that “Bonds surged after business activity across Europe encountered an unexpected setback, prompting traders to amp up wagers on monetary easing.

The yield on Germany’s benchmark 10-year bonds fell six basis points, dragging the rate on US Treasuries lower, after manufacturing and services PMI readings for Europe’s two biggest economies fell short of expectations. Markets moved to price a higher chance of two additional rate cuts from the European Central Bank this year, after the separate index for the whole of the euro-zone also dropped more than forecast in June.”

That helped gold breaks up out of consolation as they are waiting for the Chinese central bank to step back into the buy side of the market as a new central bank buyer is raising eyebrows.

Palladium had nice bottoming action and platinum above one thousand for the first time since June the seventh. Still Fed Talk and triple witching are causing some cover the outlook for metals is looking bullish both long term and short term and on pace for a wild summer ride.

Copper was struggling the usual concern was China.  Zero Hedge wrote that China’s Copper Exports Jump to Record On ‘Export Arbitrage’

They wrote that “Until the Chinese government introduces more robust stimulus packages to counter soft economic data and exporters in the world’s second-largest economy ease up on flooding global markets with copper, prices of the base metal—crucial for power lines and AI data centers—are expected to remain under pressure.

The latest customs data from Bloomberg shows that Chinese exports of unwrought copper and other products in May doubled from last year to roughly 150,000 tons, exceeding the previous high in 2012. This comes as copper prices hit a record high of more than $5.10/lb on COMEX.

Central Banks buying of gold continues to be a major drive. The World Gold Council wrote that “An increasingly complex geopolitical and financial environment is making gold reserves management more relevant than ever. In 2023, central banks added 1,037 tonnes of gold – the second highest annual purchase in history – following a record high of 1,082 tonnes in 2022.

Following these record numbers, gold continues to be viewed favorably by central banks as a reserve asset.

According to the 2024 Central Bank Gold Reserves (CBGR) survey, which was conducted between 19 February and 30 April 2024 with a total of 70 responses, 29% of central banks respondents intend to increase their gold reserves in the next twelve months, the highest level we have observed since we began this survey in 2018. The planned purchases are chiefly motivated by a desire to rebalance to a more preferred strategic level of gold holdings, domestic gold production, and financial market concerns including higher crisis risks and rising inflation.

China purchases are being watched closely by gold, But not just China. Thailand is going for the Gold.

Jan Nieuwenhuijs of Gainesville Coins wrote that “Shedding its long-standing price sensitivity to the price of gold, Thailand is currently a gold buyer driving the price up, just like China

Present changes in the global gold market, in which pricing power is shifting East, could be a precursor to a transformation in the international monetary order. Possibly, trade in the East will settle through a system connecting local CBDCs, while any remaining imbalances are transferred in gold.’

Buying physical gold and silver on pullbacks as well as future strategies the wild ride along with options are probably a very good way to play this market over the next few months. Call me to get my trade levels and strategies .

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