We hold these truths to be self-evident that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the pursuit of Happiness - and, if possible, a couple of barrels of oil.
The threat to American energy independence is clear, as the Biden administration's campaign to end fossil fuels has had any real effect on global energy demand that will hit all-time highs, and sadly, has empowered our adversaries and challenged US energy producers.
In fact, for years, one of the biggest threats to our liberty and sacred fortunes was our dependence on oil supply from countries that did not have our best interests at heart. Yet, by the daring risk-taking by our founding fathers like George Mitchell, the late Aubrey McClendon and many others, they were able to start a revolution that, against all odds, set an unlikely path to energy independence.
America has always been thought of as an exception, and these men have made it so. In 2020, the United States became a net exporter of petroleum for the first time since at least 1949. In 2022, total petroleum exports were about 9.52 million barrels per day (b/d), and total petroleum imports were about 8.33 million b/d, making the United States an annual net total petroleum exporter for the third year in a row, according to the Energy Information Administration (EIA).
Yet, instead of building on this progress, sadly, we have a political environment that has seen the federal government become more hostile to the energy freedom that the oil and gas industry fought so hard to preserve. Instead of working with the US oil and gas industry, they have made them enemies, accusing them of price-fixing and war profiteering. If anyone has interfered with prices, it has been the Biden administration.
In another desperate attempt to curb gasoline prices, it was announced very conveniently just a few minutes before the 1:30 pm central settlement time yesterday that the Biden administration was going to release 1.0 million barrels of gasoline from the reserve. While it won’t impact gasoline prices that are back on the rise going into the Independence Day holiday too much, it is yet another attempt by Biden to deflect blame for his inflationary policies.
This is the same administration that tapped the Strategic Petroleum Reserve to try to cool prices before the Russian War with Ukraine. New reports released said banks are cracking down on Russian oil and gas exports, and it was just reported that India’s crude oil imports from Russia zoomed to a 13-month high in June even as the discounts on Russian crude have narrowed, according to an analysis of data provided by intelligence firm Kpler.
The significant increase in Russia’s share in India’s oil imports can also be attributed to the resumption of imports of more grades of commodities other than Urals, including Sokol, which faced some issues in the beginning of the year. The country imported 2.13 million barrels of crude oil per day from Russia last month, up 7.2% from the previous month, the data showed. This was the highest since May 2023 when imports from Russia stood at 2.15 million barrels per day. In fact, imports from the Urals reached their all-time high of 1.6 million barrels per day in June, as reported by Financial Express.
Yet here in the US, the American Petroleum Institute reported that we saw a significant 9.163 million barrel drop in crude oil supplies, which could be the first of many in the coming weeks. And while we saw a 2.468 increase in gasoline supplies that is raising concerns about weak gasoline demand once again, evidence suggests that we’re going to see further crude draws in the coming weeks. The API reported that diesel supply fell by 74,000 barrels.
The other thing that is going to keep the market tight is OPEC production cuts. We saw a report that OPEC oil output did rise by 70,000 barrels in May to just 26.70 million barrels for the second consecutive month. There is a perception that OPEC will continue to stay committed to holding the line on production as oil prices have recovered from the OPEC taper tantrum.
Even concerns that OPEC revenues falling might break the will of the cartel seem to be overstated. OPEC revenue fell by $149 billion year over year to $680 billion. The expectation is that they’re going to hold the course and keep supplies tight and that increases the odds of a supply deficit as we move forward.
Yet there is hope. Never trade liberty for security. I think the days of the federal government crucifying a few innocents to send a message to others are coming to an end. The AP reported, “The Supreme Court’s 6-3 ruling on friday overturned a 1984 decision colloquially known as Chevron that has instructed lower courts to defer to federal agencies when laws passed by Congress are not crystal clear."
The 40-year-old decision has been the basis for upholding thousands of regulations by dozens of federal agencies but has long been a target of conservatives and business groups who argue that it grants too much power to the executive branch, or what some critics call the administrative state.
This should be a huge win for the economy, as the government now will have to make very clear goals of what producers can do, and this should open up the investment and gas projects and not have to be so concerned that after massive investments have been made, the government can change the rules of the game on a whim. And I’m not even talking about the Keystone XL pipeline. Also, a judge blocked Biden’s LNG export pause.
Stay tuned to Fox Business and load the Fox Weather app to the track of hurricane Beryl, the earliest category 5 storm on record. It could become an issue for oil and gas. Currently, most of the computer models have the storm missing the key oil platforms, refineries, and infrastructure in the US. But if the track changes, so could the fortunes of oil and gas.
The biggest risk is that if the storm boomerangs up closer towards Texas, that could put some of the LNG export terminals at risk, as well as some US refineries. Fox Weather is reporting that “Deadly Hurricane Beryl slowly weakened to a Category 4 hurricane on Tuesday as the historic storm continued to spin across the Caribbean Sea with Jamaica and the Cayman Islands in its crosshairs on Wednesday. It’s the next move for Hurricane Beryl after the storm made landfall Monday on Carriacou Island, Grenada, as a powerful, high-end Category 4 hurricane with winds of 150 mph. At least six people were killed across the region, and government officials on several islands fear that number could rise as surveys are conducted.
And now, as Hurricane Beryl continues to make its way closer to Jamaica and the Cayman Islands, residents are holding their breath and rushing to complete last-minute preparations while praying for the hurricane to wobble further south and spare the region. But with the storm just hours away, it appears likely the island will feel nearly the full fury of the storm as the eye may scrape or pass just south of the island.
We get the Energy Information Administration report on time at 9:30 a.m., but we will also get the natural gas report at 11:00 a.m. central time. We are looking for an injection of 33 BCF.
EBW Analytics on Natural Gas says that near-term weather continues to underperform, shedding an incremental 17 CDDs over the past week to allow NYMEX futures to sag below the $2.50 threshold. Key technical support at $2.37/MMBtu may offer support.
After the 4th of July weekend passes, rebounding heat and post-holiday demand—the subsequent four EIA storage weeks may average 99 CDDs per week—may lead to rising power burns and stem the bleeding for natural gas. The scorching heat is forecast to endure into August. If forecasts are verified, NYMEX futures could trend higher. Still, the weather bust of the past three weeks has led the market to refocus on bloated storage levels, mitigating the upside.
Please pray for those impacted by the storm! Also, pray for America! Happy Independence Day!