If at first, you don’t succeed, change the narrative. The Biden administration is once again trying to spin another major foreign policy disaster by trying to say that it has nothing to do with their policies. The latest failure under Biden is the horrific attack by the terror group Hamas after years of the Biden administration working to appease Iran, the biggest financial sponsor of Hamas, and turning a blind eye to oil sanctions.
The Biden administration has allowed Iran to reap billions of dollars as its exports and production have hit a five-year high. They have allowed Iran’s exports to exceed 1.5 million barrels per day and their production to above 3 million BPD and that was the highest amount since President Trump pulled out of the Iranian nuclear deal. Yet according to the Biden Team, it’s not their fault. Just this morning Treasury Secretary Janet Yellen said:
“We have not in any way, relaxed sanctions on Iran” which may technically be true, but they have not enforced them. Or maybe they enforced them the same way they defended our Southern border.
On September 29th Biden’s national security adviser Jake Sullivan was bragging about the Biden administration’s achievements in the Middle East. He claimed that the region was, “quieter today than it has been in two decades.” Now after the horrific attack on Israel, Mr. Sullivan says that the administration still does not have direct evidence linking Iran to the planning and execution of the assault. The White House is trying to suggest that Iran has some perhaps plausible deniability surrounding their support for the Hamas attack as implausible as that might seem.
The Biden State Department was quick to throw Iran a lifeline by saying:
“Iran likely knew that Hamas was planning operations against Israel but without the precise timing of or scope of what occurred.”
So plausible deniability, I guess. Kind of like the mob bosses’ work. Like how could Al Capone be responsible for the St, Valentine’s Day massacre because he was fishing in Florida that day? That same sentiment was shared by the National Security Council coordinator for strategic communications John Kirby) on “The Story” with Martha McCallum two days ago. Mr. Kirby (NYSE:KEX) couldn’t even tell Martha McCallum that the administration would change the course and commit to not releasing $6 billion in frozen Iranian funds. It was reported that Secretary of State Anthony Blinken shared a statement on X saying he encouraged Turkey’s advocacy for a ceasefire and the release of all hostages by Hamas immediately. He then deleted the tweet. What tweet – I didn’t see a tweet.
It is clear the impact on oil and the risk to supplies is still incredibly high. The International Monetary Fund issued a statement today that the Israeli-Hamas war could affect the global economy if oil prices continue to rise.
Russia and Saudi Arabia are meeting to discuss their next moves in the global oil market. It was reported that Russian Deputy Prime Minister Alexander Novak said that Russia is ready to raise oil production and shipments to Saudi Arabia. The report caused a bit of a dip in oil and products but selling products to Saudi Arabia doesn’t help the global market. Saudi Arabia and Russia are meeting to see how they can best take advantage of this situation. Saudi energy minister Abdulaziz is proposing a meeting with Russian Deputy Prime Minister Novak in November.
While Saudi Arabia and Russia continue to use their growing influence on the global oil market, the Biden administration continues to try to thwart U.S. oil and gas production. Even though the world needs more oil the fact that Gulf of Mexico oil production is the cleanest in the world, the Biden administration is taking steps to rein it in. They have proposed new regulations that could have a devastating impact on the future of Gulf of Mexico oil production in the United States and it could also be very bad for the environment.
According to a new report from the American Petroleum Institute (API) new Gulf of Mexico restrictions put on by the Biden administration would cut oil output in the Gulf of Mexico (GOM) by at least 24%. The API says that, “If the proposed restrictions are implemented, average oil and natural gas production would decline to just under 2 million BPD, a 24 percent reduction from projected levels, between 2023 and 2040. Industry investment in the GOM would decline by 14 percent from 2023-2040, with investment in the region dropping by approximately $6.8 billion, or 19 percent, in 2024 alone. They say that government revenue from oil and natural gas production would fall by 22 percent to $5.7 billion annually, and the average oil and natural gas industry employment supported by the GOM would decline by 13 percent to just under 310,000 jobs nationally.
They also warn that “transit restrictions would essentially reduce the capacity of the existing offshore oil and gas supply fleet, as the journey between shore and platforms would be extended. This reduction in transport capacity would reduce the ability to support exploration, drilling, development, and production operations, reducing the industry’s ability to explore for, develop, and produce oil and natural gas”, the study continued. “Given the Jones Act requirement that vessels transporting equipment from US ports to offshore be Jones Act compliant (U.S. built, flagged, and crewed), overcoming these restrictions would take a significant amount of time, as well as putting strain on Gulf Coast ports, and the limited pool of U.S. mariners”, the study noted as reported by Rigzone.
Yet why does that matter when you can get plenty of oil from Iran and maybe later from Venezuela? Oh, sure Venezuelans are one of the dirtiest producers in the world and Iran isn’t much better but at least if things go bad you can always change the narrative and try to take credit for reducing US production of oil and gas.
Oil prices continued to be nervous. They’re continuing to try to balance the risk to supply in the future versus the lack of impact on supply currently. Today we get to delay the American Petroleum Institute report. The whisper number surrounding the report has changed from being bullish to somewhat bearish. One of the key things to look at is gasoline inventories which inexplicably increased last week. If they snap back sharply lower than we expect, then we should get an overall petroleum draw. If not then supplies can build. Keep an eye on exports which in the United States the EIA reported yesterday hit an all-time high.
Despite the volatility in the oil prices yesterday the distillate inventories and prices continue to look strong. The crack spreads for diesel going into winter are still strong and still suggest that supplies are too tight for comfort. Even without Hamas’s attack on Israel, we believe the outlook for oil would have been bullish regardless.
People are jumping into the oil market and trying to trade more on fear than underlying fundamentals. While there is a possibility that oil can fill the gap from the Sunday night opening, we don’t think that’s likely at this point. The market is going to have to get more comfortable that the imminent risk to supply is not going to go away in an already tight global oil market.
Natural gas continues to consolidate at the upper edge of resistance. If the market on natural gas moves sideways and does not have a pullback today, the possibility exists for another upside move. The natural gas chart looks dangerous especially if we consolidate. It could be building a launchpad for sharply higher prices. Keep an eye on the weather.