The IEA is predicting a global demand versus supply deficit with global demand at 103.2 million barrels and a global production at 102.9 million barrels a day. As far as demand, the IEA says that, “In both 2022 and 2023, global oil consumption rose by more than 2 mb/d as economies continued their recoveries from the Covid-19 shock and saw spikes in personal mobility, along with exceptional releases of pent-up demand for travel and tourism. While there are reasonable grounds for uncertainty about how complete the global recovery is, both oil demand data and mobility indicators suggest that its pace has slowed sharply and that the period of demand growth above the historical average is coming to an end.”
Still, despite what you may think, inflation is getting better according to Biden and if you don’t believe that you must be psychologically scared. Just keep on moving, there is nothing to see here. Other than parabolic movements in silver, gold, copper, platinum, palladium, coffee, and cocoa, the commodity super cycle is just plain super. The IEA has had to downplay demand in the past to make its carbon objectives make sense. Now it must lower demand forecasts to not add fuel to the inflation they had a small part in creating.
So, what better time for the Biden administration once again to take steps to reduce global oil production by proposing a ban on Arctic drilling while at the same time engaging in secret meetings with the Maduro regime to cut a deal to keep sanctions on Venezuelan oil off so Biden can keep diesel prices down. There’s his chance to get reelected. Bloomberg reported that, “US officials met secretly this week with members of Venezuelan President Nicolás Maduro’s administration to keep him engaged in negotiations over democratic reforms as a deadline nears to reinstate sanctions against the nation’s oil industry. Representatives from Joe Biden’s administration and the Venezuelan government, including Daniel Erikson of the US National Security Council and Maduro’s head negotiator Jorge Rodríguez, met Tuesday in Mexico City to discuss electoral conditions, according to people with direct knowledge of the matter.
The Biden administration, even though Venezuela failed to live up to its commitment to hold a free and fair election, still want to keep sanctions off Venezuelan oil because they feared a shortage of diesel supplies and sharply rising prices. Of course, the Biden administration doesn’t have free and fair elections at the top of their agenda. What they want is to make sure that they win their election.
Now there are reports that the Biden administration is looking to push forward with the ban on Arctic drilling in an attempt to appease their environmental base. The Biden administration continues to play green energy politics with our nation’s oil supplies. Whether it be releasing oil from the Strategic Petroleum Reserve in an attempt to cool off gasoline prices before war broke out or bans on drilling pipelines or even reviews on look and find natural gas exports. But the Biden administration no doubt has been a boom for Iranian oil production and exports and also improving the prospects of Venezuelan oil producers.
Yesterday oil prices pulled down to the lower end of the support on reports that Iran decided to stand down in attacking Israel as a response to Israel’s attack on its embassy in Syria. Now it appears that Iran may have thought twice about widening the conflict and perhaps biting off a little bit more they could handle. There are reports that pentagon officials are arriving in Israel on fears of an Iranian attack. Top US generals are going to Israel amid fears of Iran strikes and Israeli defense minister said a direct Iranian attack will require an appropriate Israeli response against Iran.
The hedges in oil, gasoline and diesel are starting to pay off as well as hedges in other commodities. With major breakouts across the board, it’s going to be like the Wild West with some sizable moves and some of that’s already happening overnight. Volatility is going to be high but you could still be amazed how high these commodities might end up going once you start breaking out of historical record-breaking levels. Prices could really start to move.
The Energy Information Administration awarded the bottoming on the front end of the natural gas curve by reporting a much larger than expected injection into the supply of 24 BCF while the back end of the curve is holding up better because of the restart of the Freeport LNG terminal and other export terminals coming online. The EIA is talking about a longer-term oversupplied situation. EIA writes that, “Mild winter weather may lead to persistently high natural gas inventories through 2025.
U.S. working natural gas inventories ended the winter heating season (November 1–March 31) at 2,290 billion cubic feet (Bcf), 39% more than the previous five-year (2019–23) average. Relatively high natural gas inventories all winter have contributed to record-low Henry Hub natural gas spot prices. The surplus to the five-year average grew over winter 2023–24 because of mild weather, low natural gas consumption, and high natural gas production. In our April Short-Term Energy Outlook (STEO), we expect natural gas inventories to remain relatively high and natural gas spot prices to remain relatively low through 2025.