The West Texas Intermediate crude oil is out of whack with Brent crude and the rest of the commodity complex this morning. The market is still uncertain about the OPEC Plus gobble squabble. As I’ve written almost every Thanksgiving, there’s some new wrinkle-causing weakness in the oil market. This year of course it is concerns that OPEC Plus will raise its production because of concerns about African nations that do not want to give up their quota.
There are growing concerns that African nations such as Iran Angola and Nigeria continue to raise production. This is raising a concern that somehow Saudi Arabia will back out of its lollipop production cut and thereby flood the global oil market.
Brent crude is held up better during the fray as the US is experiencing holiday markets. Gas oil also is staying strong on concerns about a crackdown on Russian oil and gas exports. This could have a big impact on diesel supplies and because we’re getting cold weather in Europe, the market is a little less comfortable with the supply side in Europe.
JodI reported not only that global oil demand is at an all-time record high, but they also pointed out that gasoline and LPG demand are at five-year seasonal highs in September. Demand continues to go up. The question is whether supply will keep up.
Supply will not keep up if the organizers of the COP 28 conference have their way. It is expected that travelers to the 28th session of the Conference of the Parties (COP28) to the UN Framework Convention on Climate Change (UNFCCC) held at Expo City, Dubai in the United Arab Emirates (UAE) will add a record amount of carbon emissions to attend. The International Energy Agency has led Europe into economic and geopolitical instability and is saying that:
”Oil and gas producers face pivotal choices about their role in the global energy system amid a worsening climate crisis fueled in large part by their core products.”
The IEA says that:
“the Oil and Gas Industry in Net Zero Transitions finds that the oil and gas sector – which provides more than half of global energy supply and employs nearly 12 million workers worldwide – has been a marginal force at best in transitioning to an energy system with net zero emissions, accounting for just 1% of clean energy investment globally. The report shows how the industry can take a more responsible approach and contribute positively to the new energy economy, highlighting that the UN’s COP28 climate summit in Dubai is “a moment of truth” for the oil and gas sector.
The real moment of truth comes to the alternative energy industry. Interruptible supplies of energy have proven not to be reliable. We are seeing the financial burdens that cause wind turbine companies to go bankrupt. We are seeing battery technologies not live up to expectations. To electrify everything, it’s going to take trillions of dollars in the power grid with little discernible benefit for the environment. Siemens Energy last month asked for a government bailout for its wind-turbine division is now just giving up on wind.
Natural gas is torn right now. On one hand, the temperatures are cold and we’re going to see a drawdown in inventory this week. On the flip side of that, production continues to be strong which keeps us above the five-year moving average. The key for this market will continue to be whether the weather is going to continue to be cold. If it is, look for the market to pop and if not, look for it to drop.