Oil prices are surging on talk that Shanghai plans to stamp out community spread of the virus and start opening the city by May 20, according to Bloomberg. That, along with stability in stocks and threatening actions by Biden and the Democrats, will add fuel to the already bullish fires of a globe that is undersupplied. RBOB gasoline futures broke record highs overnight, and diesel, for the moment, is taking a back seat as refiners try to react to the larger diesel supply concerns.
The mind-boggling announcement by the Biden administration yesterday is driving prices higher after they announced they were going to be canceling oil leases and House Speaker Nancy Pelosi talking about cracking down on alleged price gouging is only meant to help democrat poll numbers but will only raise prices and hurt working families. It’s clear that Biden cares more about his green energy agenda than he does about the economy and working families.
Fox Business reported the DOI halted the potential to drill for oil in over 1.0 million acres in Alaska’s Cook Inlet, along with two lease sales in the Gulf of Mexico. The move comes as Biden has taken a few actions to combat high gas prices, despite his administration’s generally hostile approach to the oil industry. a DOI spokesperson told FOX Business in a statement Thursday:
“Due to lack of industry interest in leasing in the area, the Department will not move forward with the proposed Cook Inlet OCS oil and gas lease sale 258.”
He added:
“The Department also will not move forward with lease sales 259 and 261 in the Gulf of Mexico region due to delays due to factors including conflicting court rulings that impacted work on these proposed lease sales,” the spokesperson added. The spokesperson also told FOX Business that there are 10.9 million acres of federal offshore waters already under lease to industry,” and “of those, the industry is not producing on more than three-quarters (75.7% or 8.26 million acres).”
House Speaker Nancy Pelosi’s gas gouging bill is another first by democrats who are desperate to deflect blame for rising gasoline prices. Somehow Speaker Pelosi believes that she knows what a fair price should be for a gallon of gasoline, and anything excessive will be illegal. This type of legislation is only going to further create tight supplies because if gas station owners are afraid to raise prices or oil companies are afraid to lower prices. Those supplies will end up in another country.
OPEC raised production but is still far short of quota, and Russian diesel exports have fallen as buyers are avoiding it. Reuters reported that the OPEC on Thursday cut its forecast for growth in world oil demand in 2022 for a second straight month, citing the impact of Russia’s invasion of Ukraine, rising inflation, and the resurgence of the Omicron coronavirus variant in China. In a monthly report, the Organization of the Petroleum Exporting Countries (OPEC) said world demand would rise by 3.36 million barrels per day (bpd) in 2022, down 310,000 bpd from its previous forecast.
Oil Price reported that OPEC continues to undershoot its oil production target in the OPEC+ deal, failing in April to boost output as much as required by the agreement. All 13 members of OPEC – including Iran, Libya, and Venezuela exempted from the OPEC+ deal – saw their production rise by just 153,000 barrels per day (bpd) collectively to 28.648 million bpd in April, the organization’s Monthly Oil Market Report (MOMR) showed on Thursday. The top three OPEC producers, Saudi Arabia, Iraq, and the UAE, saw the highest increases in their respective oil production last month, while output in Libya plunged by 161,000 bpd to below 1 million bpd, at 913,000 bpd, according to OPEC’s secondary sources according to oil price.
As we mentioned yesterday, it appears that the short-term bottom is in after the market double bottom near the targeted bands looks like we’re going to be seen anywhere close to 110. There seems to be a little resistance overnight at 108. Our expectations are that we should continue to move higher, and we do think that there will be some reluctance to be short over the weekend. There’s also the concern on the natural gas side – weather and supply issues are continuing to drive this market higher. Look to buy brakes.