Energy Prospectus

Crude Oil Higher; IEA Lifts 2022 Demand Forecast

By Peter Nurse with my comments in blue. At the time of this post WTI was trading at $94.37/bbl.

Investing.com -- Oil prices climbed Friday, boosted by bullish comments from the International Energy Agency.

By 9:05 AM ET (1405 GMT), U.S. crude futures traded 1% higher at $90.80 a barrel, while the Brent contract rose 0.8% to $92.16. From 12:30ET to 1:30ET WTI gained almost $2.50/bbl.

U.S. Gasoline RBOB Futures were up 0.5% at $2.6787 a gallon.

“The oil market is incredibly tight,” Toril Bosoni, head of the IEA’s markets and industry division, said in a Bloomberg television interview on Friday. “Prices continue to surge and are now reaching levels that are uncomfortable for consumers across the world.”

The agency cited the OPEC+ coalition’s “chronic” struggle to revive output for the market’s tightness, saying that unless the group’s heavyweight producers, i.e. Saudi Arabia and the United Arab Emirates, pump more oil for export, prices will undoubtedly climb further.

The shortfall at the end of the year between the amount of oil the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, was supposed to have pumped and what it actually delivered since the start of 2021 could amount to 1 billion barrels, the IEA estimated.

The Paris-based institute also lifted its 2022 demand forecast by 800,000 barrels a day, seeing global demand growing by 3.2 million barrels a day this year.

This follows OPEC raising its estimate of global demand this year by 4.15 million barrels per day this year in its monthly report on Thursday.

That said, oil prices are on track for their first weekly decline after seven consecutive weekly gains (this changed after noon), with traders keeping track of the ongoing talks between the West and Iran over the potential restoration of a treaty limiting the Persian Gulf country’s nuclear ambitions.

A deal could lift U.S. sanctions on Iranian oil, leading to the potential return of more than one million barrels per day, more than 1% of global supply, to the global market. <(a) I think Iran is already selling most of their oil to China at a discount and (b) lots of agreement details need to be worked out. Team Biden will down in history as the worst administration ever if they allow Iran to get weapons grade uranium.

Also weighing on the crude market was Thursday’s red-hot inflation report, which raised the prospect of aggressive Federal Reserve interest rate hikes, giving the U.S. dollar a lift.

A stronger dollar means that commodities denominated in the greenback, including the crude market, become more expensive for overseas buyers. < WTI at $94 is even more impressive given the relative strength of the US dollar.

Oil Prices Spike 8th Week in Row on Fears Russia Will Invade Ukraine Soon
Feb 11, 2022 01:25PM ET

Investing.com - Oil prices spiked for an eight week in a row, hitting $95 a barrel, on concerns that Russia will invade Ukraine soon and after the International Energy Agency warned that global supplies might be dangerously short of demand.

The latest developments in oil offset losses in crude prices from earlier in the week triggered by worries over excessive U.S. rate hikes to deal with inflation and worries of a legitimate return of Iranian oil to the market.

The United States believes Russian leader Vladimir Putin has decided to invade Ukraine and communicated those plans to the Russian military, the PBS news service reported, adding that two officials of the Biden administration say they expect the invasion to begin next week. < The U.S. needs to stay out of this fight. Let Europe deal with Russia. One American death to defend Ukraine (a corrupt nation) is one to many.

The Paris-based International Energy Agency, in a monthly report on Friday, lifted its forecast for this year’s global oil demand by 800,000 barrels a day to 3.2 million barrels.

What’s more, it estimated there could be a billion barrels shortfall by the end of last year between what the Organization of the Petroleum Exporting Countries and its allies — known as OPEC+ — were supposed to have pumped versus actual deliveries to the market since the start of 2021.

“The oil market is incredibly tight,” Toril Bosoni, head of the IEA’s markets and industry division, said in a Bloomberg television interview on Friday. “Prices continue to surge and are now reaching levels that are uncomfortable for consumers across the world.”

The IEA warning lit a fuse under oil prices that had lost more than 3% earlier in the week, first on concerns that Iranian oil supplies could legitimately return to the market through a Tehran-West nuclear deal and fears that the Federal Reserve could impose rate hikes as much as 0.5% a month successively over several months this year to curb U.S. inflation.

Adding to oil's climb were heightened fears of an imminent Russia-Ukraine war. Multiple sources familiar with the matter told CNN on Friday that the United States and its allies had new intelligence that suggested Moscow could launch an attack on Ukraine even before the end of the Olympic Games. Russia is a major oil producer within OPEC+ and faces stringent U.S. sanctions on its economy in the event of an invasion.

New York-traded West Texas Intermediate was up $4.49, or 5%, at $94.37 per barrel by 1:54 PM ET (18:54 GMT). For the week, WTI was up more than 2%, for an eight straight week of gains.

London-traded Brent, the global benchmark for oil, was up $3.94, or 4.3%, at $95.35 per barrel. For the week, Brent was up 2.1%, rising for an eight week in a row like WTI.

From OilPrice.com

Friday, February 11th, 2022

Wherever you looked this week, it seemed that Iran was at the center of all oil market news. The prospect of a breakthrough in the nuclear deal, a breakthrough that was assumed to be imminent by several participants, drove oil prices lower over the week after last week’s bull run to mid $90s. The fact that Iran’s crude would take several months to reach markets if a deal were agreed upon shows that this was largely driven by sentiment.

On the fundamental front, OPEC+ underperformance is potentially flirting with 1 million b/d in February, news that led even the IEA to get involved in pushing for more oil. The IEA joined the ranks of India and other major importers, all calling upon Middle Eastern exporters to bring more crude into the markets.

IEA Calls Out Saudi Arabia and UAE. The International Energy Agency (IEA) stated that Saudi Arabia and the UAE could use their spare capacity to compensate for the ever-worsening underperformance of OPEC+, with the missing volumes totaling some 800,000 b/d since the start of 2021.

Global Shortage Spreads to Diesel. Global shortages of diesel have become the new talk of the town as inventories in Northwest Europe fell to their lowest level since at least 2008, whilst Singapore gasoil stocks also dropped to multi-year lows of 8.2 million barrels.
If you have been watching my weekly podcasts, you know that I have been calling diesel inventories "dangerously low" for several months. We cannot solve the supply chain problems without a lot of diesel.

Libya Gets Closer to the Brink, Again. The prospects of oil production in Libya were hampered after the eastern-based parliament in Tobruk named Fathi Bashagha the country’s new prime minister, unbeknownst to the other government in Tripoli, ratcheting up risks of further infighting.

Canadian Exports From USGC Keep on Soaring. Thanks to improvements in pipeline connectivity, Canadian oil producers exported record volumes of crude from terminals in the US Gulf Coast, reaching 300,000 b/d in December-January, roughly double what they were a year ago.

Crude hit 94.66 WOW. It was 89.19 yesterday.

What are the odds that CLR is still unhedged