I guess that I can't go on vacations anymore!

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dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

I guess that I can't go on vacations anymore!

Post by dan_s »

Each time Susan & I leave on a short trip, you guys let the oil price go down. Well, I am back at my desk, so let's get oil back over $70/bbl. This latest Covid Variant is just a "Scariant" that is not going to wipe out the human population. Oil demand is down just a "rounding error" and will rebound quickly. My comments in blue.
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The Energy Report: Omicron Away
By Phil Flynn Dec 06, 2021 10:06AM ET

Momma don’t take my Omicron away!

Oil prices are trying another comeback as Saudi Arabia showed enough confidence to raise their selling price for oil and reports that the Omicron variant bark is worse than its bite.

The Wall Street Journal reported that, “U.S. chief medical advisor Anthony Fauci said that there didn’t appear to be a 'great deal of severity' to Omicron. US regulators said Sunday that the Food and Drug Administration planned to streamline authorization for revamped vaccines. Also, there are no reported deaths caused as a direct result of the variant, so the odds of major lockdowns have gone down. So the rumors of massive oil demand destruction have been greatly exaggerated. < My Take is that each time a new variant is discovered the "expert scientists" will ALWAYS over-state the danger because they are being paid BIG MONEY to generate "Click Bait" and politicians (like Fauci) are using FEAR to distract from the terrible jobs they are doing.

Saudi Arabia is trying to prove that they are not afraid of the variant. Bloomberg reported that Saudi Aramco (SE:2222) increased January’s prices for all crude grades that will be shipped to Asia and the U.S., according to a statement from the state producer. The company raised its key Arab light grade for customers in Asia by 60 cents from December to $3.30 a barrel above a benchmark.

You may also be shocked to know that reports suggest that the Iranian nuclear talks are not going so well. Reuters reported that,

“U.S. Secretary of State Antony Blinken on Friday said that the latest round of Iran nuclear talks ended because Iran right now does not seem to be serious about doing what is necessary to return to compliance with a 2015 deal. Blinken, speaking at the Reuters Next conference, said that the United States would not let Iran drag out the process while continuing to advance its program and that Washington will pursue other options if diplomacy fails." < If Team Biden does not deal with Iran and get tough real quick, it will be the worst thing the US has ever done. Iran with weapons grade uranium scares me a lot more than fake "Climate Change".

Now, while I believe that oil prices should come back substantially, we still have some technical resistance up above. Not only did the sell-off in oil damage the charts, but it damaged the confidence of whale buyers. The funny part about that is that if demand destruction fails to happen, the market’s probably gonna be undersupplied by 1 1/2 to 2 million barrels of oil a day. Even talk of the increase in production by OPEC plus Russia is not going to make a difference because let’s face it, OPEC plus Russia can’t even pump their quota right now.

Natural gas prices are getting crushed as temperatures are warmer than normal in many parts of the country and forecasts say they are staying that way. Natural gas prices are lower than they were in July. < Old Man Winter is saving up the real cold air for late December.

EBW Analytics reports that the January natural gas contract imploded last week, shedding $1.345/MMBtu (-24.6%)—the worst weekly loss in over a decade. While the front-month had already been poised for steep losses, the weather shift that eviscerated 86 Bcf of gas demand amplified downward pressure.

Attempts at a relief rally on Friday quickly lost steam. Moreover, as of Sunday evening, the additional loss of 11 gHDDs over the weekend is likely to augment downward momentum. While shorts may take profits at any point, it is entirely possible that the January natural gas contract could plummet $2.00/MMBtu—from $5.562/MMBtu towards $3.56/MMBtu within the space of two weeks.

Yet in Europe, there is a panic. Dan Graber reports that the head of Europe’s largest operator of natural gas storage sites told the Bloomberg news service on Dec. 3 that cold winter could be a disaster for the Continent. < As long as demand for US LNG exports remains high the US gas market will remain tight.

Depleted storage levels and concerns about steady levels of supply have put a substantial premium on the price of natural gas in the European economy. The January gas delivery contract at the Dutch TTF hub was dropping during the Dec. 3 session to trade in the lower €91 (US$103)/MWh range, though prices at this point last year were in the upper teens.

Marco Alvera, the CEO of Snam (OTC:SNMRY), Europe’s largest gas storage operator, said cold winter and the subsequent increase in demand could deplete gas storage levels to a “dangerous” point. “If this is a cold winter, we’re in real, real trouble,” he told Bloomberg. < Europe will need to go to burning a lot more oil and coal for space heating.

Gas flows from Russian energy company Gazprom (MCX:GAZP), one of the leading natural gas suppliers to the European market, hit a six-year low last month and are down 24% year-on-year. From January through November, exports are about 11% below pre-pandemic levels.

Bloomberg reported the Italian government warned earlier this week there may be blackouts should gas shortages continue. Alvera said those likely would not last long, though he said industrial end-users may be asked to voluntarily cut back as a stop-gap measure. Data from Gas Infrastructure show European gas storage levels at 66% capacity, below the 85% found in the 10-year average for this time of year.

John Kemp reports that European electricity prices are climbing again as traders anticipate persistent tightness throughout the winter, which will require increased generation from the oldest, least-efficient, and highest emission units to meet combined load across the continent’s interconnected grid. < Welcome to "Woke World".

How is that energy transition going for you?
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34463
Joined: Fri Apr 23, 2010 8:22 am

Re: I guess that I can't go on vacations anymore!

Post by dan_s »

Trading Economics:
"WTI crude futures accelerated the rebound to over 5% to trade near to $70 per barrel on Monday, after top exporter Saudi Arabia raised prices of its Asia and US-bound crude for a second straight month in January, and as indirect US-Iran talks on reviving a nuclear deal appeared to have stalled. The price hikes were implemented despite a decision by the OPEC+ last week to continue increasing supplies by 400,000 barrels per day in January. Meanwhile, British, French and German negotiators trying to revive the 2015 Iran nuclear deal said on Friday that the new, more hard-line government in Iran is proposing unacceptable changes to the existing draft agreement including the lifting of all sanctions. WTI futures suffered six consecutive weeks of declines after the release of emergency reserves by major consumers, exacerbated by concerns around the Omicron variant and its impact on global economic growth and fuel demand."

Raymond James take on SPR oil release:
"What about global SPR releases? It’s been odd to us to see global consuming countries fret about oil prices that remained roughly one-third below levels seen in 2011-2014, and even lower when adjusted for purchasing power. Yes, prices at the pump rose in 2021 at one of the fastest y/y paces on record, but the ‘panicked’ reaction to coordinate strategic reserve releases has still been surprising. Here’s our view: 1Q22 flows will be hit by global SPR releases – with some unknowns still – approximating ~1 million bpd for the quarter. But, a large chunk of the U.S. SPR release is a loan that must be returned (e.g., putting upward pressure on demand in late-22 or 2023), and while industry/commercial stockpiles are clearly a focal point of the market, this is merely shifting barrels from ‘one hand to the other.’ Lastly, some of the SPR releases might well ‘disappear’ from global inventories – especially if a chunk of OECD barrels (i.e., from the U.S.) end up in non-OECD areas where inventory measurement is much more opaque. All in, SPR releases are a rounding error in our assessment of the forward outlook — with core supply/demand and Omicron impacts far more important."
Dan Steffens
Energy Prospectus Group
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