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FRIDAY EDITION February 3rd, 2023 |
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The Energy ReportPhil Flynnhttp://www.pricegroup.com/ pflynn@pricegroup.com Oil Hokey Pokey. The Energy Report 02/03/2023 You put the oil in, you take the oil out, you put the oil in, and you shake it all around. You do the hokey pokey and you turn yourself around. That’s what it is all about. When it comes to the US Strategic Petroleum Reserve, the Biden administration does not know whether it’s coming or going. As its historic 180 million barrel drain has come to an end, the administration is boasting that it would be buying oil back for the reserve at a big profit of around $70 a barrel. Yet while there was some noise that might happen, the Biden administration failed to close the deal. Yet at the same time, previously agreed SPR sales to reduce the US budget deficit are still scheduled to take place, further drawing down our depleted reserve. Yesterday it was reported that the Energy Department is asking congress to halt the sale of 26 million more barrels of oil from the nation’s emergency supply of oil mandated for this fiscal year as it seeks to refill the strategic petroleum reserve. Yet that seems to be interesting because the Biden administration is also saying that they are not ruling out more SPR sales when the market starts surging once again as we head to the summer driving season. So let me get this straight. You don’t want to sell and you want to buy, but you might have to sell. Yup sounds just like a typical Biden administration policy. In the meantime, US refiners helped keep US gas and diesel supplies flowing, using record-breaking refining utilization, signaling that they may have to cut back. OIL Price and Reuters are reporting that following record utilization last year, U.S. refiners expect to have lower capacity operating in the first quarter of this year, due to a heavy maintenance season. After operating at over 90% for most of 2022, the largest U.S. refiners now see their first-quarter utilization below 90%, and analysts expect refinery capacity utilization to be between 85% and 89% at the beginning of 2023, Reuters notes. The planned maintenance in the first quarter will affect the highest level of refining capacity in five years, analysts told Reuters. What this means is that this should set the stage for another spike in gasoline and diesel prices this summer. US refinery runs have been low due to refining issues helping with recent crude oil supply increases. Reuters is reporting that the Pemex (PEMX.UL) is nearing a full restart on Thursday of its 312,500-barrel-per-day (bpd) Deer Park, Texas, refinery following an unplanned shutdown because of severe storms on Jan. 24, said people familiar with plant operations. The market this week had a hard time shaking off weekly supply data that showed increases. The builds that we’ve seen in recent weeks reflect a sharp drop in demand. I think the thoughts that demand in the US have plummeted are misguided though. We did see some weakness in the US manufacturing sector that could account for some demand weakness. What we have to remember is when you’re talking about the demand for oil here in the United states, it is, relatively speaking, very strong. The Department of Energy continues to under represent demand on a weekly basis. Last week we saw the demand for gasoline go up, demand for diesel go down and we saw the demand for jet fuel going up. There’s going to be some real concerns about jet fuel supplies going into summer. Supplies of jet fuel are below average and we’re already seeing spot shortages at many airports. This is part and parcel of the refining shortage. In the push toward green energy, nobody wants to be associated with diesel fuel and that is helping to create this global shortage. Venezuela is stepping up trying to fill the void, selling their heavy oil which is very good for making diesel fuel but at the same time, it plays into the geopolitical risk factors. Today’s jobs report probably could push oil back into the positive if it comes out weaker than expected because demand is weak due to recent warm weather. The market is able to fret about every headline that comes across the board. We have seen a lot of choppy volatility and we expect that to continue but our base case is that we’re going to be facing a very tight market this year. We think the China reopening is going to leave the market under supplied. Unless we see a major drop off in economic activity around the globe, we still expect to see oil prices back above $100.00 this summer. There is a substantial risk of loss in trading futures and options. 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. PFGBEST, 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. 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. PLACING CONTINGENT ORDERS SUCH AS "STOP LOSS" OR "STOP LIMIT" ORDERS WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS. SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. 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. Contact Phil at 1-888-264-5665 or pflynn@pricegroup.com. |
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Robert J. Moriarty