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The Energy Report: At It Again

Published 06/17/2024, 09:53 AM
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Apparently, the Biden Administration believes that the Strategic Petroleum Reserve (SPR) is their own little political slush fund. The Biden team is saying that they will potentially tap the reserve using taxpayer money to help influence the outcome of the election. I think I read somewhere that someone else was accused of something like that. Regardless, according to the FT, “The Biden administration is ready to release more oil from its strategic stockpile to halt any jump in petrol prices this summer, as the White House battles to contain inflation ahead of the November election.”’ So, I guess you can spend money, which increases inflation, and put on regulations that raise prices and kill pipelines that raise prices and put on drilling moratoriums that raise prices and then slander the oil and gas industry and mom-and-pop gas stations then use the SPR to make it all ok. All the while using the SPR for political cover while leaving the country vulnerable if there is a major oil disruption.

We are not just talking about hurricanes. In a year where they are predicting a record amount of hurricanes there is also the growing risk of global conflict that could impact supply and those risks have increased dramatically under this administration.

Russian Warships in the Caribbean,  bringing back memories of the Cuban Missile Crisis, as wars wage in the Ukraine, Gaza, and ongoing attacks on ships from the Iranian-backed Houthi rebels which all are a risk to oil supply. Reports that Russian subs and the Russians carrying supersonic missiles are meant as a gentle threat about Biden’s escalation of the war in Ukraine.

Fox News reported that “Russia is a longtime ally of Venezuela and Cuba, and its warships and aircraft have periodically made forays into the Caribbean. But this mission comes less than two weeks after President Joe Biden authorized Ukraine to use U.S.-provided weapons to strike inside Russia to protect Kharkiv, Ukraine’s second-largest city, prompting President Vladimir Putin to suggest his military could respond with “asymmetrical steps” elsewhere in the world.

The Washington Post reported that “One Russian reporter described the visit as retaliation for Biden’s decision to allow Ukraine to strike inside Russia with American weapons. “Last week, President Vladimir Putin made it clear that it reserves the right for a mirror response – that is, supplying long-range weapons to countries that feel the pressure of the United States,” the Russia 24 reporter said.

This comes as the sanctions on Russian oil and gas are failing. The Financial Times reported that, “Europe’s gas imports from Russia overtook supplies for the United States for the first time in two years even though the region must mean itself off of Russia and fossil fuels. The strategic blunders that Europe has made was to go head first into green energy alternatives and becoming more dependent on Russia for supplies and now it seems they just can’t quit. Diesel supplies in Europe are very tight and now they are looking to the US to replenish those supplies but at the end of the day, Russia continues to supply more and more energy to Europe every day.

The FT reported that “Following Russia’s full-scale invasion of Ukraine in February 2022, Moscow slashed its pipeline gas supplies to Europe and the region stepped up imports of LNG, which is shipped on specialized vessels with the US as a major provider. The US overtook Russia as a supplier of gas to Europe in September 2022 and has since 2023 accounted for about a fifth of the region’s supply.

But last month, Russian-piped gas and LNG shipments accounted for 15 percent of total supply to the EU, UK, Switzerland, Serbia, Bosnia and Herzegovina and North Macedonia, according to data from ICIS. LNG from the US made up 14 per cent of supply to the region, its lowest level since August 2022, the ICIS data showed.

The reversal comes amid a general uptick in European imports of Russian LNG despite several EU countries pushing to impose sanctions on them. Russia in mid-2022 stopped sending gas through pipelines connecting it to north-west Europe, but continues to provide supplies via pipelines through Ukraine and Turkey according to the FT.

Gasoline prices are continuing to fade as demand is still struggling as consumers bear the brunt of inflation. John Kemp at Reuters points out that, “U.S. GASOLINE prices at the pump (including taxes) are almost exactly in line with the long-term average, once adjusted for inflation. Nationwide prices have averaged $3.59 per gallon so far in June which was in the 52nd percentile for all months since the start of the century.

This week we are looking for crude supply to fall by 2 million barrels. We are also looking for distillate supply to fall by 2 million barrels. Gas supply should pop 2 million barrels and refinery runs should be flat.

Natural Gas is pulling back after the heat-driven rally. Hopes for some moderation are giving us a break. Yet Fox Weather is watching the Gulf Of Mexico. They say that “The National Hurricane Center (NHC) is monitoring a tropical disturbance in the Gulf of Mexico that could develop into a tropical depression or tropical storm this week, and while the system is expected to stay south of the U.S., fears are growing that tropical moisture being pulled north could lead to flash flooding along the Texas, Louisiana and Mississippi coasts.

EBW Analytics is saying that bearish weekend fundamental catalysts for natural gas were plentiful: off-the-charts record heat for late June retreated, the production turned upwards to three-week highs, and LNG feedgas ebbed on maintenance at Corpus Christi LNG. A near-term downside appears likely. EBW says that it technically similarly points to a deeper retrenchment following a bearish double-top pattern at $3.16/MMBtu. While long-term fundamentals also appear weak, however, substantial, scorching heat over the next 30-45 days may still yield higher highs first.

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