While the petroleum markets try to shake off an almost ridiculously bearish weekly American Petroleum Institute (API) that showed a larger than expected 4.05-million-barrel increase in crude supplies and an equally bearish 4.026 million barrels increase in gasoline supply and a 1.975 million barrel increase in distillates, the longer term issues of global energy security remain.
The short-term focus of the market weakness is on concerns that that OPEC’s production cut taper might mean a flood of oil that would be released, Also concerns that weak gasoline demand is because inflation is hammering the poor in the middle class in this country.
As politicians continue to pursue inflationary policies and anti-fossil fuel policies and attack US oil and gas that will not do anything to ease their burden.
In the US we pay lip service to energy security with grandiose plans and a false vision of trying to drive our economy by interruptible sources of energy with wind and solar and the pipedream of electrifying of car fleet to get rid of the pipe, the reality is that we have and aspirational energy policy that is based on politics and ideology and not cold hard realities.
While the day-to-day fundamentals shift with the season and sometimes the algo traders, the reality of under-investment in reliable energy sources and wasted money on many alternative sources of energy raises the risk of our country being woefully under-supplied. The question you must ask is whether or not the US will choose to hold its energy rice bowl in its hand, because if we do not, we know that our competitors like China will. How do I know that! Well because they said so.
Ok I am not sure exactly what holding your energy rice bowl in your hand actually means but it sounds more coherent than recent energy polices coming out of Washington.
What I do know is that China has a much more realistic energy approach that includes not only alternative energy but fossil fuels as well.
China has a plan to “accelerate the construction of a new energy system and improve the ability to guarantee the security of energy resources.”
The Chinese National Energy Association (NEA) wrote that “Energy is an important material foundation and power source for economic and social development, and is related to the national economy, people’s livelihood and national security.”
They went on to say that “Based on the national conditions of energy, China has comprehensively promoted supply-side structural reforms, vigorously enhanced domestic resource production guarantee capacity, and continued to increase high-quality and effective supply. We have implemented a series of strategic measures such as releasing advanced coal production capacity, vigorously improving oil and gas exploration and development, and building a new power system, and completed and put into operation a number of world-leading century projects such as Baihetan Hydropower Station and “Hualong No. 1” Nuclear Power Plant, which have historically solved the problem of electricity consumption for the population without electricity.
They say that They “led the world in the development of non-fossil energy, achieved remarkable results in the clean and efficient utilization of fossil energy, further consolidated and improved the diversified supply system of coal, oil, gas, new energy and renewable energy, and continuously improved the level of safe production.”’
The Biden administration always seems to tout and seem to be envious of China's advancements in solar panels and other alternative energies and electric cars yet maybe they should understand that China's success is based on the fact of them everything in the above energy policy. They include all forms of energy such as coal oil and natural gas mixed in with renewable energy.
I do know that suddenly, the Biden administration is making big steps towards making nuclear right again the reality is that they are political ideology and their anti-fossil fuel agenda is hurting our economy and will do so in the future unless they change course.
Yet instead, the Biden Administration continues to attack US oil and gas.
May 3Oth the AP reported that “Senate Majority Leader Chuck Schumer and 22 other Democratic senators are calling on the Department of Justice to “use every tool” at its disposal to prevent and prosecute alleged collusion and price-fixing in the oil industry. In a letter Thursday to Attorney General Merrick Garland and other officials, the Democrats said a recent Federal Trade Commission investigation into a high-profile merger uncovered evidence of price-fixing by oil executives that led to higher energy costs for American families and businesses.
The FTC said earlier this month that Scott Sheffield, the former CEO of Pioneer Natural Resources (NYSE:PXD), colluded with OPEC and OPEC+ to potentially raise crude oil prices. Sheffield retired from the company in 2016 but returned as CEO in 2019. After retiring again in 2023, he continued to serve on its board.
The case against Scott Sheffield does not measure up to the realities of the global energy market nor does it add to US energy security. In Fact, it weakens it.
I have just been reminded of a speech given by Darren Woods of Exxon Mobil (NYSE:XOM) gave in November of 2023 where he said that “ Climate change is real, Human activity plays a major role, And, it is one of the major problems facing the world today – the need to address the very real threat of climate change. But it is not the only one. Here’s another global problem, equally important – the need to continue producing affordable energy to maintain and raise living standards around the world.
Mr Wood said that “Three billion people fall short of modern living standards, and far too many remain trapped in extreme poverty with no access to electricity or clean cooking fuels. The global North-South divide will only be bridged when we commit to solving the world’s energy and emissions challenges simultaneously.” Oil and gas are at the center of both. Combusting them is a leading source of man-made greenhouse gas emissions. That is the societal cost, and it’s real. At the same time, the societal benefits of oil and gas are unmatched in human history. They have done more to grow economies, eradicate poverty and improve quality of life than anything else.”
Oil and gas companies reliably provide affordable products essential to modern life. Making them into villains is easy. But it does nothing – absolutely nothing – to accomplish the goal of reducing emissions.
In fact, it puts the reliable supply of energy at risk…destabilizing global economies, degrading people’s standards of living, and, as we saw in Europe, raising emissions. The better approach – the constructive approach – is to harness the industry’s capabilities for change.
Mr wood begs “Put us to work. We have got the tools – the skills, the size, and the intellectual and financial resources – to bend the curve on emissions.”
Yesterday U.S. Treasury Secretary Janet Yellen said that “a Russian oil price cap is still somewhat effective.” So, we got that going for us.
US gasoline demand has been horrible. Prices in many markets are coming down but prices in Chicago is almost 70 ahead of the national average. The market’s reaction to the OPEC production taper is overdone especially because the compensation production should more than offset most of the so-called tapering of the supplies.
This problem the OPEC cartel right now seems to be Iraq which continually overproduces. That’s going to raise tensions in the cartel unless they start to cut back production very shortly. The reimposition of sanctions on Venezuelan oil could also tighten up supplies as we will see a reduction in Venezuelan exports which surged over 30% in the month of May.’
The markets are trying to hold these levels even after the bearish API report keep an eye for the Energy Information Administration status report to see if it shows better demand than the API is suggesting.
If they do, then we probably have a good case at the bottom end if not get prepared for a test of $70 on crude.
Natural gas is getting support because we’re going to get our first significant heat wave.
Fox Weather reported that “ Just a handful of days into meteorological summer, and heat is already becoming life-threatening in the western U.S. Heat alerts have been issued for parts of California, Nevada, Utah, Arizona, New Mexico, and Texas. It’s possible that Las Vegas could set a record for its earliest 110-degree day during this heat wave.
Fox Weather also reports that “Rare June atmospheric river storms are dumping rain on the Northwest this week. The first ended earlier Monday before the second one arrived Monday evening. Flood alerts are up for parts of Washington.
A region of Kilauea volcano in Hawaii that hasn’t erupted since 1974 became active Monday. Officials said the eruption is happening in a remote area and is low in volume, but “vog” (the visible haze s of gas and aerosol of tiny particles and acidic droplets created when sulfur dioxide and other gases emitted from a volcano chemically interact with sunlight atmospheric oxygen and moisture and dust could become a problem for areas downwind of the volcano.“