Anyone who thought that President-elect Trump would waste any time laying down the hammer on Russia and Iran, well it’s time to think again. Reports are circulating that not only will the incoming Trump Administration take the novel approach of actually enforcing sanctions on Iran but also unleashing a new round of sanctions on Russia, Russia, Russia in what may be the “art of the deal” persuasion move to end the senseless killing in the Russia Ukraine War.
In fact already Russian President Vladimir Putin said he takes Donald Trump’s plan to end the war with Ukraine very seriously and Russia supports it. Yet those that propagate the war say that you can’t negotiate with Putin and the only way to settle this is to continue the quagmire, spend billions on weapons, and continue the killing.
Yet new sanctions in Russia and enforcing the old sanctions on Iran does rase the risk of higher Oil prices in the short term. That is something that will not please President Trump. My assumption is that President Trump will use his good relationship with Saudi Crown Pince Mohammed bin Salman Al Saud to make sure that OPEC steps up to the plate and makes up for any supply shortfall.
All oil traders knew that President Trump was very successful in persuading Saudi Arabia and OPEC to increase oil production in the past, sometime with a gentle nudge or one of those nasty tweets. As I wrote at the time I did not know that you could tweet more oil out of the ground. I guess I was wrong.
President Trump also saved the US oil and gas industry by successfully ending the oil production war between Saudi Arabia and Russia. It was a war that led to an oil price crash when covid hit, driving Crude Oil WTI Futures into negative territory.
Trump also helped producers by allowing them to store oil in the SPR until the market stabilized saving many US oil and gas producers from bankruptcy and at the same time saving high paying union energy jobs. No wonder the rank-and-file union workers support the President elect. He saved jobs in the energy industry as opposed to the Biden administration that eliminated energy jobs. Mainly with the Keystone Pipeline but also with regulation and discouraging investment in US oil and gas projects.
Biden promised to replace those jobs with ‘green energy’ jobs but that never happened. And the jobs that were created did not pay as well as the jobs that were replaced. Of course, that was not a problem in China where they don’t have the same pay worries for the green energy jobs that Biden helped create for them.
Sadly during that time Senator Chuck Schumer and the democrats killed a plan that Trump had to refill the SPR at the historically low oil price near $24.00 a barrel. He said at that time that he did not want to bail out US OIL and gas companies. No wonder democrats are losing their union base. Maybe because their policies are costing union worker jobs and an empty promise of creating new ones.
Also, in the short term, there will be less incentive to short oil because, let’s face it, the election is finally over. Also, we will need more jet fuel as celebrities will be flying their private jets as they make good on their promises to leave the country because Donald Trump was elected.
The weekly oil inventories for the week were less than inspiring but as we are in the middle of shoulder season, that is not that much of a surprise. The real surprise is that if you look at the four-week moving average for demand, it was well above the average last week but fell below average. The Energy Information Administration (EIA) reported that, “Demand for all petroleum products averaged 20.6 million barrels a day, down by 1.5 from the same period last year. Gasoline demand averaged 8.9 million barrels a day, down by 1.5% from the same period last year. Distillate fuel demand averaged 3.9 million barrels a day over the past four weeks, down by 5.1% from the same period last year. Jet fuel products supplied were down 1.5% compared with the same four-week period last year. That should pick up with the Hollywood celebrity exodus.
Supply though is below average. The EIA reported that, “U.S. commercial crude oil inventories increased by 2.1 million barrels from the previous week. At 427.7 million barrels, {{8849|U.S. crcrude oil inventories are about 5% below the five-year average for this time of year. Total (EPA:TTEF) motor gasoline supply increased by 400,000 barrels from last week and are about 2% below the five-year average for this time of year. Distillate fuel inventories increased by 2.9 million barrels last week and are about 6% below the five-year average for this time of year.
The Fox Weather Channel warned us and already we are seeing Hurricane Rafel shut down Gulf of Mexico production. The Bureau of Safety and Environmental Enforcement has activated its Hurricane Response Team and reports that based on data from offshore operator reports submitted as of 11:30 a.m. CDT today, personnel have been evacuated from a total of 11 production platforms, 2.97% of the 371 manned platforms in the Gulf of Mexico. Personnel have been evacuated from one non-dynamically positioned (DP) rig, equivalent to 16.6% of the six rigs of this type currently operating in the Gulf. A total of one DP rig has moved off location out of the hurricane’s path as a precaution. This number represents 4.7% of the 21 DP rigs currently operating in the Gulf. From operator reports, BSEE estimates that approximately 17.4% of the current oil production and 7.04% of the current natural gas production in the Gulf of Mexico has been shut-in.
Fox Weather reports that Hurricane Rafael is forecasted to meander Gulf of Mexico after lashing Cuba with powerful winds, flooding rain. That is not good for bringing production online. Download the Fox Weather Ap to get the latest.
Fed Day will keep us on edge but there is strong support under $70. If you get a chance position there.
We also get the EIA natural gas report. Anthony Harrup at the Wall Steet Journal writes that, “U.S. natural gas inventories likely increased by more than usual last week as milder-than-normal autumn temperatures limited demand, according to a survey by The Wall Street Journal.
Natural gas in underground storage is expected to have risen by 64 billion cubic feet to 3,927 Bcf in the week ended Nov. 1, according to the average estimate of nine analysts, brokers and traders. Estimates range from an injection of 47 Bcf to an injection of 76 Bcf. The storage build would be larger than the five-year average for the week of 32 Bcf, and increase the surplus over the five-year average to 210 Bcf from 178 Bcf the week before. The U.S. Energy Information Administration is scheduled to report weekly natural gas storage data on Thursday at 10:30 a.m. EST.