Oil Price Forecast - April 9

[dan_s]

Comments below are from KEITH KOHL | APR 09, 2024 with my comment in blue.

There’s no worse feeling than watching a plan fall apart. Unfortunately for us, the plan currently unfurling before our eyes is tied to our energy security. < The Green New Deal is a $Trillion screw-up. Historians will not be kind to Joe Biden.

Believe me, watching the market finally start to wake-up and discover the bullish case for oil during the second half of 2024 has been quite the spectacle. Not that we blame them, mind you. It’s been an exercise in patience waiting for that realization to hit home.

Still, nobody can say we didn’t see this coming.

But as Brent crude prices hover around $90 per barrel, with WTI prices not far behind, it’s easy to get an ominous feeling that this summer is going to be a shock for some people.

The good news is that it’s not too late to join this party… maybe.

Over the last few years, President Biden has shown that he’s willing to do whatever it takes to keep oil prices from running too high.

Although people incessantly argue back and forth whether his energy plan was the right one to take, what nobody can deny is that he’s willing to do whatever it takes.

Think about it…

In 2022, the President sold an unprecedented amount of oil from our strategic reserves. Given the circumstances, it was one of the only moves that a U.S. President could make after Russian tanks started rolling over Ukrainian soil.

His plan was simple — sell as much of our strategic reserves as necessary to stabilize global oil supply. Over the course of six months, approximately 180 million barrels of oil flowed out of the SPR.

And to be fair to the President, had he not stepped in when he did, we would’ve seen oil prices soar higher. It was an aggressive plan to provide some short-term relief at the price of long-term pain.

But there WAS a plan in place for us to recover after draining our SPR to a level not seen in 40-years… we’ll just buy that oil back when prices fall again.

In fact, the plan was to buy back that oil when crude prices fell between $67-$72 per barrel. Unfortunately, that buying window didn’t last nearly as long as our government had hoped — today the SPR is still sitting at 40-year lows around 363.6 million barrels.

That means that out of the 180 million barrels we sold off in 2022, we’ve only replenished around 32 million barrels so far.

That’s going to be a major problem, and you’ll see why in a second.

The President has a serious dilemma on his hands right now.

If there’s one thing that every sitting president fears during an election year is high energy prices. When Americans start feeling the pain at the pump, they tend to get disgruntled at the ballot box.

I think this will force President Biden’s hand once again this summer when crude prices start to rise — and you can bet he’s going to go back to the only playbook he has access to right now.

Look, it’s no secret anymore than the precarious balance between supply and demand is getting tighter as the weather gets warmer. < During April through July each year demand for transportation fuels increases by AT LEAST 2 million bpd.

However, this situation is exasperated by the fact that we are both overestimating our domestic production and underestimating demand levels.

It’s a perfect storm for higher oil prices.

So when the summer heat finally hits and crude prices creep back towards $100 per barrel, I believe President Biden will dip back into our strategic reserves in a last-ditch effort to keep a lid on gasoline prices before the November election.

At this point, he’s out of other options.

Oh, we’ll see the usual angry tweets from the White House castigating oil companies and OPEC for being greedy; that’s certainly a part of the playbook. However, the only way he can have any sort of effect on actual supply is through the SPR.

The President already played his cards lifting sanctions on Venezuela and easing pressure on Iran’s oil industry. < Iran has used all of the extra cash that Biden's policy has given to the world's largest sponsor of terrorism to supply weapons to their proxies in the Middle East. Thousands of people in Israel and Gaza have died as a result. Venezuela won't have free elections, but it won't change Biden's policy.

Desperate times call for desperate measures.

There is some good news if you feel like you're late to the party. Summer isn’t here just yet, and oil seems overbought right now. If we’re going to see a pullback, it’ll happen over the next few weeks.

The only question for you is whether you’ll be ready for it or not.

Until next time,
Keith Kohl
Keith writes the Energy Investor newsletter. About half of his top picks are in our three model portfolios, but I recommend that you subscribe to his service. He covers some subsectors that I don't.

[Cliff_N]

Dan, I am not sure how he is seeing a "pull back" in the next few weeks? If the Walking Mummy takes more out of the SPR, is that his point? I am sure he is correct that the SPR will definitely be tapped, but at this point, people have wised up. 19%+++ inflation, Mortgage rate avg from $1300 to $1800 has turned the 18-29 aged folks (GEN Z) against Scranton Joe.

The pull back will start big time if Trump wins...drill, baby drill, reduction of regulations, etc. will drive oil down to the 60s again. Gas should be good. I placed a few bets with Jerry Jones on CRK, so far up 5%!

[mrbill]

Draining the SPR, strategic petroleum reserve, will be the plan. However, Summer Hurricane season is coming,
with predictions for an active season. Unpredictable Weather related Black Swans. Hope there are none to skew "the plan".
Active wars all over the place. Hope none of them get out of control.

[aja57]

Just as Truman attempted to nationalize the steel industry during the Korean War, who's is to say that Biden wouldn't attempt to do the same with energy? Look what happened with student loan debt forgiveness in front of SCOTUS. He lost big time but gave them an FU salute and is doing it again. What's to say another manufactured crisis occurs this summer with energy , geopolitical turmoil or another bio pandemic and he just invokes a 'Hugo Chavez edict' on energy companies? Might be easier than releasing the SPR. And it would take a light year to get to SCOTUS. Just sayin.