The Energy Report: Mortgaging the Future

Oil prices are shaking off concerns of an economic slowdown as China’s reopening is a reality, not a theory. The OPEC Secretary General, Mr. Haitham Al Ghais of the State of Kuwait, today speaking in Davos, said that he expects to see OPEC oil demand rise by 500,000 barrels a day this year.

He also said that OPEC’s going do whatever it takes to stabilize the global oil market and is warning about massive underinvestment in oil and gas that is going to lead to a global shortage of oil and gas. He said that $12.1 trillion will be needed in the coming decades to meet demand.

The problem is that most of the leaders in Davos are more concerned about climate change despite signs that their efforts to control the climate are futile. What we see in China is the fact that they are going to have some long-term commitments to coal. China’s coal production has hit an all-time high. Reuters reported that total output for the year reached 4.496 billion tons, which was a 9-percent increase in 2021, according to official statistics data reported by Reuters.

This comes after the International Energy Agency (IEA) last month warned that global coal use is set to rise by 1.2% in 2022, surpassing 8 billion tonnes in a single year for the first time and eclipsing the previous record set in 2013, according to Coal 2022, the IEA’s latest annual market report on the sector.

Yet the IEA now is saying investment in clean energy tech needs to soar to $4.5 trillion through 2030 to meet the net-zero 2050 goals. According to the IEA, the unprecedented scale of required investment will need industrial strategies from the countries to mobilize those investments across all regions, technologies, and supply chains.

But it also signals that we’re seeing under-investment in fossil fuels. The ESG movement and the green energy movement are really backfiring. Not only has it led to instability in Europe, but it’s also adding to more economic risk across the spectrum.

This, in part, is why our base case is for a major rebound in oil prices this year. We also think products are near lows. Diesel heaters should look for breaks in the market to lock in prices.

In Europe, natural gas prices continue to plummet with warm weather, but here in the US, signs that winter may return are giving the natural gas market a pretty good oversold bounce. BAM Weather (BAMWX) says that a cold pattern should settle at the end of January in the central US.

No guarantees, but this is also a substantially better setup for #Winter Weather for the Midwest, OH Valley, and Mid-Atlantic. We’re going to be keeping a close eye on the last week of the month.