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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


Compromised. The Energy Report 10/20/2021

Is the green energy transition compromising world leaders or compromising the health of the global economy. Is it raising risks of food shortages and economic mayhem?

The crude oil market may be pulling back a bit on China's attempts to try to cool down coal and oil prices, yet the global energy crisis is far from over. Bloomberg reported that China is reviewing measures to intervene in coal prices amid rising costs, the state planner says in a statement on its WeChat page after a meeting. "The National Development and Reform Commission will closely monitor with relevant departments the dynamics of the coal market and price trends." Market regulators will step up inspection and enforcement to crack down on illegal activities such as hoarding and price collusion. Sounds like Biden administration's plan.

Yet Saudi oil minister Prince Abdulaziz bin Salman is making more sense than other world leaders warning that, "we should not compromise energy supply safety for climate modification fight." Mr. Abdulaziz says clearly that low financial investment in hydrocarbons is affecting oil rates. He is warning that gasoline and natural gas supplies are low and is trying to talk sense into world leaders that have been compromised into believing that wind and solar and other biofuels can easily replace hydrocarbons. He is warning that fuel switching could add 500,000 to 600,000 barrels a day. As a reminder, the IEA's October report highlighted a global oil market that is currently undersupplied by 700,000 b/d as OECD inventories hit 210 million barrels below the five-year average.

Iraq's oil minister Ihsan Abdul-Jabbar Ismail says that he is forecasting $100.00 a barrel oil in Q1-Q2 of 2022. That is more in line with our forecast. We do not think we will hit $100.00 this year but we could see $88. If we get cold early, then that goes to $99.

This comes as the New York Times reports that, "about 20,000 heads of state, diplomats and activists are expected to meet in person starting Oct. 31 at a United Nations global warming conference beginning this month in Glasgow to set new targets for cutting emissions from burning coal, oil and gas that are heating the planet. The conference is held annually but this year is critical, the Times says because scientists say nations must make an immediate, sharp pivot away from fossil fuels if they hope to avoid the most catastrophic impacts of climate change. Yet the Times says that China, Australia, Russia, and India have yet to make new pledges to cut their pollution, and it's not clear that they will before the summit.

OPEC Secretary General Mohammed Barkindo says oil industry investment shrunk 27% over 2017-18, then was slammed by the COVID-19. "We have not fully recovered from this contraction. We would like to see this on the global agenda, particularly in Glasgow" Good Luck. Yet world leaders have to be shaken by the energy crisis and if they come off too strongly in reducing investment in fossil fuels, then it may cost them politically at home. The poor are bearing the brunt of this crisis.

ZeroHedge reports China's move to impose export restrictions on fertilizers will be felt worldwide. Beijing's increased scrutiny comes as global fertilizer markets have been battered by plant shutdowns and skyrocketing prices that may continue to boost food inflation well into 2022. Chinese communist party officials have called for stable fertilizer supplies and food security amid overseas turmoil. On Oct. 15, Beijing implemented a new rule requiring additional inspection of fertilizer exports. The general administration of customs added new inspection requirements on urea to ammonium nitrate, according to Bloomberg.

Last month, a statement published on WeChat by the National Development and Reform Commission, China's top economic planner, urged local authorities to ensure stable prices by keeping fertilizer plants operating despite widespread power cuts. This call for adequate fertilizer supplies is critical for the country to sustain agricultural production amid mounting food security risks.

Marketwatch reported that, "The American Petroleum Institute reported late Tuesday that U.S. crude supplies rose by 3.3 million barrels for the week ended Oct. 15, according to sources. The API reportedly showed inventory declines of 3.5 million barrels for gasoline and 3 million barrels for distillates. Crude stocks at the Cushing, Okla., storage hub, meanwhile, edged down by 2.5 million barrels for the week, sources said. Inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA is expected to show crude inventories up by 2 million barrels, according to a survey of analysts conducted by S&P Global Platts. The survey also calls for supply declines of 2.2 million barrels for gasoline and 2.4 million barrels for distillates. This report looks supportive. Big draws in Cushing, Oklahoma and big drops in products should lend support.

MarkertWatch reported that Russia indicated that it may not provide additional natural gas to European consumers amid an energy crunch in the region, unless it gets regulatory approval to start shipments through the Nord Stream 2 pipeline, Bloomberg reported Tuesday. Renewed worries about natural-gas supplies likely fed expectations that the energy market would need to boost demand for oil, analysts said. It looks like Russia may not increase natural gas shipments to Europe, said Phil Flynn, senior market analyst at The Price Futures Group. The Russians are "in no hurry whatsoever to comply" with demands from the European Union, he said.

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Phil is one of the world's leading energy market analysts, providing individual investors, professional traders and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline and energy markets. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide.

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Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.

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