Energy Prospectus

At 12:35 PM CT the May21 futures contract for WTI was up more than $2.00/bbl at $61.20. Today's trading range has been $58.86 to $61.33.

OPEC+ agreed to gradually increase production from May through July.

Members of the 23-nation oil producing alliance, meeting via a two-day video hook-up, agreed to raise output by 350,000 barrels per day in May and June, and 400,000 bpd in July.

Saudi Arabia was initially reported to be considering another 250,000 barrels per day of cuts in May, and 250,000 bpd in June, to provide continued support to the market. It terminated that idea after reaching a consensus with the other producers that an output hike not be a bad thing after all, especially if demand for crude spiked in the coming months, allowing the kingdom greater market share.

Since OPEC+ production cuts began a year ago, the Saudis have single-handedly led the reductions, conceivably allowing U.S. crude producers, who aren't a part of the alliance, to grow their oil exports at the expense of the kingdom. After weeks of remaining trapped at around 2.5 million bpd, U.S. crude exports jumped last week to 3.2 million bpd, data showed.

Iran, which officially remains under Trump-era sanctions banning exports of its oil, has also been shipping with immunity to China since President Joe Biden came into office in January, those with knowledge of the matter say.

While Iran is a founding member of the original OPEC cartel, it has never contributed a single barrel to the production cuts of the past year due to the Trump sanctions. Its stepped up exports to China could thus be depriving other producers trying to legitimately grow their oil sales.

"If anything, the Biden administration could move soon to do a deal with the Iranians that would officially remove the sanctions on them, and it might be prudent for the Saudis to try and increase their market share ahead of that," said Tariq Zahir, crude trader at New York macro fund Tyche Capital Advisors.

Goldman Sachs (NYSE:GS) global head of commodities research Jeff Currie, meanwhile, predicted that oil prices will hit $80 by the third quarter. Such lofty projections have often led to a crash instead.

Whatever the case, the diverse factors in play sent oil prices all over the place, with the market initially rallying more than $2 a barrel before dropping nearly $1 at one point.

Energy Report: The Wrong Guy
By Phil Flynn (Apr 01, 2021 09:06AM ET)

The Joe Biden administration, for the first time since taking office, finally reached out and confronted OPEC that has been instrumental in sharply rising oil prices during the first few months of his administration. Energy Secretary Jennifer Granholm tweeted that:
“I had a productive call with Saudi Energy Minister Abdulaziz bin Salman al-Saud today. We reaffirmed the importance offers of international cooperation to ensure affordable and reliable sources of energy for consumers.”

The only problem here is that she is talking to the wrong guy and the Biden infrastructure plan is the exact opposite plan that will bring us affordable and reliable sources of energy for consumers.

The man that has the power to change Saudi Oil policy is Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud, which is someone that the Biden administration refuses to talk to because of his alleged ordered killing of Saudi Journalist and U.S. citizen Jamal Khashoggi. So I doubt that this call will have any impact on the Saudis relenting on their voluntary 1 million barrel a day production cut

Oil prices freaked out after the OPEC Plus panel ended without a policy decision. Yet the lack of a decision does not mean that OPEC Plus is not going to agree to roll over cuts because they will. OPEC lowered its demand expectations so any pullback from a rollover of cuts would hurt prices and it is unlikely they will allow that to happen. Lockdown announcements in Europe give the cartel the justification that it needs. The Saudis are pressuring members on compliance and the meeting ended asking for compensation cut plans from cheating OPEC members that will be submitted today. The only question I think will be whether they roll over the cuts for one month or two.

Energy Secretary Jennifer Granholm who has a disdain for fossil fuels and the fossil fuel industry, also tweeted about her conversation with the Saudi Oil Minister:,
“We also discussed closer collaboration to solve common challenges and develop renewable energy sources, increase efficiency, reduce methane in oil and gas production, and develop clean forms of hydrogen to combat climate change.”

The Saudis are moving big into the hydrogen space.

The Biden infrastructure plan also will eliminate tax preferences for fossil fuel companies which also will not bring us affordable and reliable sources of energy for consumers. The truth is that if we are going to build roads and bridges we will need a lot of petroleum products. More of a tax burden on U.S. fossil fuel companies will make "build back better" with "build back with foreign oil".

Bloomberg reports that:
“Canada’s oil-sands industry was among the hardest hit sections of the industry when Covid-19 and a worldwide glut of crude crashed prices last year. Now, assuming some or all of Biden’s wish list is granted, heavy crude from Western Canada may be poised for a rebound.“

The asphalt industry should be elated with Biden’s plan to upgrade 20,000 miles of roads in the U.S.,” said Charles Kemp, a senior consultant at Baker & O’Brien Inc. “However, this announcement favors heavier oil production from outside of the U.S., which contains roughly double the amount of asphalt versus the asphalt content in light crudes from U.S. domestic production.”