Lying Eyes. The Energy Report 08/22/2024

You can’t hide your lying eyes, but the Bureau of Labor Statistics sure tried. The U.S. Bureau of Labor Statistics had to fess up and revise down its estimate of total employment in March 2024 by a record 818,000, the largest such downgrade in 15 years.  Oil prices plummeted after being lied too even as oil and product inventories plummeted, and weekly gasoline demand came in just shy of a record high and what some say that based on supply and demand was the most bullish fundamental reports in 7 years.

There are still worries about Chinese oil demand on fears that this record crude imports might be in the rearview mirror and India feasts on cheap Russian crude.  Yet despite demand fears the oil market is still in backwardation so the recent market action reeks of a market that has been lied do removing confidence that the people in charge can acually mange the economy away from a nasty economic hard landing. An economy is based in part on trust and the market is losing its trust.

The Energy Information Administration (EIA) reported a massive 4.6-million-barrel counter seasonal draw.  Gasoline inventories fell by 1.6 million barrels as demand surged to 9.19 million barrels a day, just missing the record for this time of year.  Distillates also has whopping draw of 3.3 million barrels a day.

And even as the market is fretting about global demand the US exported a massive 11.35 million barrels a day.
Yet the numbers don’t seem to matter as the market subtracts geopolitical risk factors and the element in trust not only in US data but trust in the people that are running the country.

China concern     have been a bearish talking point all year.  Reuters wondered ” Is it time to ask whether China’s crude oil imports have peaked?
The world’s biggest oil importer brought in record volumes last year, a feat that seems unlikely to be repeated in 2024 given the decline in arrivals in the first seven months.
The market consensus so far, though, is that the weakness in 2024 is temporary and China’s import of crude oil will resume an upward trend as soon as the world’s second-largest economy regains momentum.

Reuters also reported that ” India overtook China as the world’s biggest importer of Russian oil in July as Chinese refiners bought less because of lower profit margins from producing fuels, a comparison of import data showed.
Russian crude made up a record 44% of India’s overall imports last month, rising to a record 2.07 million barrels per day (bpd), 4.2% higher than in June and 12% more than a year ago, data on Indian shipments from trade and industry sources showed.

Gasoline demand goes up and prices go down hitting the lowest seasonal level in 2 years, In part the EPA has helped lifting a RVP waiver to blend higher RVP gas in Illinois because of refining issues to allow winter blends early help price to crash. The EPA is worried about the environment unless it impacts the party in power.

Price charts look very difficult right now and you must go with the mood of the market. You should   protect puts for further downside price but be aware we are into a supply squeeze.

WE are still vulnerable to price spikes So even though the horrible technically with the key thing you want to do is make sure you’re protected from an upside spike because at some point supply and demand that might matter.
Democrats that try to justify Bidens energy policy point to record oil production. People in the energy industry know better. So does the EIA. They say oil production has increased not because of Biden buy despite them. The EIA said that: In our latest Short-Term Energy Outlook (STEO), we forecast that crude oil production in the United States will grow to an average of 13.7 million barrels per day (b/d) and marketed natural gas production will grow to an average of 114.3 billion cubic feet per day (Bcf/d) in 2025. Most of the forecast growth in oil and natural gas production comes from the Permian region of western Texas and eastern New Mexico, where we expect productivity gains, new and expanded infrastructure, and high crude oil prices will support rising production.”

Nat gas is coming back on the heat, John Kemp wrote that EU GAS STORAGE reached 90% full on August 19, just three days later than in 2023, and otherwise similar to 2020 and 2019, when the market was heavily over-supplied.

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