Stop the Flow. The Energy Report 01/30/2025

Maybe there is a way to avoid oil sanctions on Canadian and Mexico and other goods. Stop the flow of fentanyl! Commerce Secretary Howard Lutnick said that for Canada and Mexico to avoid the 25% tariffs – they must stop the flow of fentanyl. Those words caused a drop in oil that had already been trying to shake off a cold weather impacted oil inventory report from the Energy Information Administration (EIA)  and there seems to be a sense by traders that somehow these tariffs are going to be avoided. Whether there are right may be the catalyst for the next oil move that seems to be back in a trading range with a slight downside bias.

Yet if the Trump Administration can get Canada and Mexico to join the US and stop the flow of fentanyl, that would save lives and at the same time does not impede the flow of oil and make it more expensive. Mr. Lonick said that, “So this is a separate tariff to create action from Mexico and action from Canada,” Lutnick said of the 25% duty threat. “And as far as I know, they are acting swiftly, and if they execute it, there will be no tariff.”

The tariffs on Canada would hurt US refiners that need Canada’s heavy crude. It also is going to hurt California because they chose to reduce oil production and instead become more dependent on Canadian oil. Besides, with the expected clampdown on Venezuela by the Trump Administration we could see diesel supplies really tighten. It’s going to be to everybody’s advantage if Canada Mexico takes reasonable steps to try to stop the flow of illegal drugs into the United States. It will be a win for everyone. The US will combine less oil from Venezuela and buy more oil from OPEC and Canada.

Yep, this threat of sanctions has Alberta Canada looking at ways to diversify their economy from being so reliant on oil. Bloomberg reports that “– Canada’s top oil-producing province of Alberta plans to boost its wealth fund roughly tenfold to C$250 billion ($173 billion) by 2050 in a bid to wean itself off volatile natural resource’s revenue. The government formed a corporation to oversee the C$24.3  billion Heritage Savings Trust Fund and seek opportunities to  raise returns to 9% annually from about 7% now, it announced Wednesday. It also passed legislation that requires the fund to reinvest its returns rather than distribute them to the province. I guess that means they don’t give you a check when you move to Alberta.

In the meantime oil demand is rocking around the clock. Cold weather and a strong US economy have led to increased demand for petroleum, gasoline, distillate fuel, and jet fuel, with significant year-over-year growth in consumption. The EIA put demand over the last week on average at 20.3 million barrels a day, up by 2.5% from the same period last year. Gasoline demand averaged 8.3 million barrels a day, up by 1.8 % from the same period last year. Maybe the strength and gasoline demand were partly due to electric cars getting frozen in the snow or maybe they couldn’t hold their charge. Who knows

Distillate fuel demand  averaged 3.9 million barrels a day over the past four weeks, up by 6.9% from the same period last year. The jet fuel supplied was up 4.5% compared with the same four-week period last year.

Freeze off cut U.S. oil production last week following by 237,000 barrels a day from 13.477 million barrels down to 13.2400 million barrels per day. I used to think I was the only person that questioned some of the crazy assumptions of the International Energy Agency (IEA). as I’ve been writing for many years. I think the International Energy Agency lost their way. I think it became a political organization not so much geared into trying to secure energy security but promote a green energy agenda to satisfy global elites. When I first started writing about this many people felt it was just sour grapes, but the reality is I could see that the IEA’s agenda didn’t match up with the actual data that they were providing. In other words, they seemed to secure the data to fit a political agenda and that is very dangerous

In fact, a new report from the National Center for energy analytics, is saying exactly that same thing. They are warning that the IEA’s flawed assumptions lead to dangerous ‘forecasts’. The National Center for Energy Analytics wrote that, “For decades, the International Energy Agency  (IEA) was the world’s gold standard for energy information and credible analyses. Following the commitment of its member governments to the 2015 Paris Agreement climate accords, the agency radically changed its mission to become a promoter of an energy transition. In 2022, the IEA’s governing board reinforced its mission to “guide countries as they build net-zero emission energy systems to comply with internationally agreed climate goals.”

The IEA’s current preoccupation with promoting an energy transition has resulted in its signature annual report, the World Energy Outlook (WEO), offering policymakers a view of future possibilities that are, at best, distorted and, at worst, dangerously wrong. They highlighted 23 problematic, flawed assumptions that are relevant specifically to the International Energy Agency report the World Energy Outlook. WEO’s oil scenarios and the widely reported “forecast” that the world will see peak oil demand by the early 2030s. While other scenarios about other energy sources are critical as well, oil remains a geopolitical touchstone and the single biggest source of global energy—10-fold greater than wind and solar combined.

At the very least, this analysis points to the need for real-world scenarios in general and, in the case of oil, the much higher probability that demand continues to grow in the foreseeable future and, possibly, quite significantly. I agree.

Natural gas is going to be impacted by the cold.  Anthony Harrup at the Wall Street Journal wrote that, “U.S. natural gas inventories likely fell sharply last week, turning from a surplus to a deficit as bitter cold weather across much of the U.S. boosted demand for heating and froze in some production.

Natural gas in underground storage is expected to have decreased by 317 billion cubic feet to 2,575 Bcf in the week ended Jan. 24, according to the average estimate of 11 analysts, brokers and traders surveyed by the Wall Street Journal. Estimates range from a withdrawal of 310 Bcf to a withdrawal of 332 Bcf. The storage reduction would be larger than the five-year average withdrawal for the week of 189 Bcf, putting inventories 107 Bcf or 4% below the 2020-2024 average and 140 Bcf below their year-earlier level. The U.S. Energy Information Administration is scheduled to release weekly storage data on Thursday at 10:30 a.m. EST. Natural gas storage is typically drawn down during the months of November through March and replenished during the summer. The exceptionally mild 2023-2024 winter had left inventories around 40% above average at the end of the withdrawal season last year.

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