Things that make you go “Huh?”. For Example, the Biden administration says that we do not have an open border policy while millions of migrants cross the border and end up in our cities. Now claims that the Biden administration State Department says that they are enforcing Iranian oil sanctions while Iran’s exports and production are surging while their floating oil storage has been drained. If this is the Biden administration's idea of enforcing sanctions, then I would have to say that it has failed miserably.
Iran’s oil exports are well over 2 million barrels a day, currently close to 2.2 million barrels a day. Iran, which was forced to stockpile crude oil and condensates into floating storage, saw those supplies go over 100 million barrels. Now those supplies have fallen to under 30 million barrels as the Biden team turned a blind eye to enforcement. Now Reuters is reporting that
“SVB International, a consultant, estimates Iran’s oil production increased in August to 3.15 million barrels per day (bpd), the highest since 2018, with crude oil and condensate exports at just under 2 million bpd. “Iran is on the path to recover its pre-sanctions oil production.”
While the State Department continues to say that they are enforcing sanctions, behind the scenes there are leaks that the Biden administration is allowing Iran to rake in the cash in hopes that maybe, just maybe, they could resurrect the ill-fated and flawed nuclear deal that Biden promised he would resurrect after he got elected. It is also possible that Biden is looking to Iran to help keep oil prices lower to help him politically because his war against the US oil and gas industry and his shunning of Saudi Arabia was a double-barred shot in the head to the US economy and to consumers that must deal with the inflationary aspects of Biden’s radical climate policies.
Those policies and Biden’s policies and his poor diplomatic relationship with Saudi Arabia is the main reason why Saudi Arabia seems intent on sticking it to us when it comes to reducing oil production. Even as global oil inventories start to plummet as global demand exceeds daily production levels, reports say that the Saudis are going to extend the famous lollipop million barrel a day production cut through October.
This comes as Jaiver Blass writes that,
“All the year-to-date increase in US commercial crude stockpiles has been wiped out, with inventories now essentially flat vs the beginning of the year (422.9m last week vs 420.6m end of Dec 2022). But sure, demand is terrible.”
Russia is also piling on as the vow that they will cut their exports of their coveted and short-supplied heavy crude leading to more concerns of global diesel shortages this winter. Russia’s Deputy Prime Minister Alexander Novak says Russia does not rule out extending its voluntary cut on crude exports until October. And now supply shortages are becoming more obvious. People are asking the question that the Energy Report has been asking for months. If global oil demand is so bad, then why is oil and product supply so tight?
As I have written before, despite concerns about increasing interest rates and a slow economy in China, supply and demand data never really fit the slowing demand mantra that continued to plague the markets. It seemed that the market continued to be chopped down by concerns about the lifting of Iranian sanctions to banking concerns were real, but did it impact demand? Not really.
In fact, US petroleum demand over the last four-week period averaged 21.2 million barrels a day, up by 6.1% from the same period last year. I believe the reason why the market did not realize that the situation was so dire was that the market was broken due to unprecedented intervention by global governments to flood the market with short-term supplies. Now the market must realize that those supplies are gone and we must face the real world where intervention by governments around the globe to release oil and disincentivize investment is leaving the market short.
This was one of my major concerns when Biden started to play with the Strategic Petroleum Reserve to try to control prices of gasoline and later tried to alleviate a shortage that never really happened because of the Russian-Ukraine war. And while it did bring down prices in the short term, it did more damage in the long term and that’s why we’re starting to face fears of higher prices. And US supply continues to tighten dramatically.
The EIA said that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 10.6 million barrels from the previous week. At 422.9 million barrels, U.S. crude inventories are about 3% below the five-year average for this time of year. Total motor gasoline inventories decreased by 0.2 million barrels from last week and are about 5% below the five-year average for this time of year. Finished gasoline inventories increased while blending components inventories decreased last week.
We also got the natural gas report today and the expectations are that we’ll see a smaller-than-expected injection into supply because of high temperatures in Texas and the lack of wind. On top of that natural gas prices soared yesterday because of another wave of hot temperatures and the fact that the power outages in Florida, as bad as they were after the storm, weren’t as bad as anticipated.
Globally, when it comes to the green energy movement, reports from Bloomberg that, “Australia’s grid operator is warning of energy shortfalls over the next decade as the nation retires 62% of its coal power fleet “ in another sign that they’re putting climate craziness over the reliability of supply. It also means that the cost of energy is going to be more expensive and the poor and middle class are going carry the burden. This is a report that over 1000 scientists believe that the climate emergency doesn’t exist. We need to stop the craziness.