Oil demand in the US hit all-time highs but is pulling back temporarily in hopes that a war between Russia and Ukraine is not imminent. The Biden administration is backing off previous comments that a war between Russia and Ukraine was imminent.
White House press secretary Jen Psaki suggested that she had only used the term that once, which means it doesn’t count. Maybe you have to use the term three times before it counts or maybe 4 times. Regardless, she did acknowledge that others used that term, maybe more than once, yet she said that:
“We stopped using it because I think it sent a message that we weren’t intending to send, which was that we knew (Russian) President (Vladimir) Putin hasn’t made a decision.”
Perhaps they stopped using that term because it raised the ire of NATO partners as well as Ukrainian president Volodymyr Zelenskyy that tried to calm the world down and his own people by downplaying the risk of the Biden administration incendiary rhetoric of imminent Russian invasion.
The Ukrainian president on Friday blasted Biden by saying that Ukrainian officials don’t have any misunderstandings with Joe Biden:
“I just deeply understand what is going on in my country, just as [Biden] understands perfectly well what is going on in the United States.”
He also accused Western media reporting of undermining Ukrainians’ faith in their government and stoking economic panic across the nation.
Well, the White House got the message and has backed off yet has to be careful as they could light the match that could cause a major unwanted and ill-advised war that would have an incredible human cost, as well as an economical cost and, could cause a major energy crisis across Europe and the world.
The walking back of those imminent war comments caused a walking back of oil prices as well. Prices did surge after the OPEC cartel confirmed their worst kept secret: they would continue along their path of 400,000 barrel a day production increases. That failed to wow the market despite some speculation that they may have tried to shock the market with a bigger than expected announced production increase.
Yet even if OPEC decided to promise more oil, they have to still make up for all they have failed to pump. The latest report on that comes from Reuters that suggests that OPEC that while estimates vary, the group was about 800,000 bpd behind target at the end of last year, a figure that has likely now grown to something closer to 1 million bpd.
OPEC struggles come as US oil demand is back above pre-pandemic levels and hitting all-time highs. The Energy Information Administration said that total products supplied over the last four-week period averaged 21.6 million barrels a day, up by 11.8% from the same period last year. That would be an all-time high. The American petroleum market is on fire, estimated for US oil demand (4-week rolling average, even). The data says demand January-to-date (and December) is running at an all-time high, above the 2019 pre-pandemic seasonal levels. On the flipside, US oil production dropped last week to 11.5 million barrels. That is down from 12.9 million barrels a day two years ago.
So how does that work again? More demand and less supply? Oh yes, I remember, bullish.
Oil watcher Tim Dallinger points out that oil exports data may be under-reported, meaning that oil supplies may be even tighter than we think. He says that independent ship trackers showed that last week had record exports. However, the EIA did not confirm.
Natural gas had an incredible run with concerns about this cold front going all the way down into Texas. Major snow and some forecasters calling for another blast of cold is having Texas prepare for what could be another challenge to its energy infrastructure system. Governor Abbott is vowing to keep the lights on in Texas.
We all remember last winter when Texas lost a lot of lives because of poor planning as far as its energy infrastructure and wind turbines and solar that were not adequately prepared for cold weather. Some tried to blame natural gas, and it’s true that natural gas could have been better protected, but at the end of the day, natural gas has proven to be a more reliable supplier.
This last year was no doubt a failure of wind and solar, and it’s not just Texas where we’ve seen failures of these 2 sources. Earlier this year, the UK admitted that they suffered power outages because of an over-reliance on wind and solar when the wind did not blow, and the sun did not shine.
Still, the freeze-offs on natural gas pipelines are definitely causing a drop in production, impacting natural gas. We’re seeing a little bit of a dip right now, and if indeed, the weather stays cold, the natural gas could have another leg up. Make no mistake about it we did get very overbought in this parabolic market, but if the cold continues, we could see natural gas prices the longer term get back up above $6.
Let’s hope the lights will stay on in Texas yet finger-pointing and tensions remain high. Naureen S. Malik of Bloomberg News reported that Vistara Corp., one of the largest power generators in Texas, accused units of pipeline operator Energy Transfer (NYSE:ET) LP of price gouging ahead of a looming winter storm that will raise demand for natural gas.
Two Vistra units filed a complaint Tuesday to the Texas Railroad Commission, which oversees the oil and gas industry, requesting action against the pipeline firm over a plan to charge a premium when electricity prices at certain hubs exceed $500 a megawatt-hour. Energy Transfer didn’t respond to a request for comment. Vistra declined to comment.
Plunging temperatures are poised to test the main Texas grid in the coming days, and expectations of record winter demand have already sent electricity prices for Friday surging.
According to traders, on-peak power for Ercot’s North hub closed at $800 for Feb. 4 on the Intercontinental Exchange (NYSE:ICE). Vistra and units of Energy Transfer had already been in a payment dispute over last year’s catastrophic Texas storm. The units last month threatened to cut service to Vistra over $21.6 million owed in fees from February 2021. Vistra has argued those fees are illegal.