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The Energy Report: Peak Oil by Design

Published 06/18/2024, 09:22 AM
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While there are expectations that global oil demand will break the record this year and for years to come, there are signs that global oil production may be peaking and by design. The green energy madness that has swept the globe is taking its toll on oil investment and oil producers are getting regulated out of performing to the best of their ability.

Rystad Energy said in a report on Monday that global oil supply growth will likely slow this year with a high possibility of a further decrease in 2025. The group is not only pointing towards the voluntary production cuts by the OPEC plus cartel but also because OPEC failed to raise their demand forecasts, which is still one of the highest of any major reporting agencies. The group drastically reduced their oil supply growth for 2024 from 900,000 barrels a day to a mere 80,000 barrels a day for this year. JODI Data reported that Saudi Arabia’s crude oil exports fell by 445 kb/d. India's oil demand is humming. JODI Data reported that India’s oil imports hit 5.5.3 mb/d: increasing by 509.9 kb/d m/m.

This comes as another report is suggesting that further investment and more political support with oil production in the once prolific United Kingdom could have peaked and could fall dramatically. Oil Price. com reported that the UK is currently producing some 1.2 million barrels of oil equivalent, but this will fall steeply to just 700,000 barrels daily by 2030, according to forecasts by the North Sea Transition Authority—the industry regulator, as cited by Bloomberg. It doesn’t have to be happening but because of the fossil fuel backlash and the lack of direction when it comes to in the UK and other parts of the world, it is causing a potential shortfall that is going to damage the poor and the middle class.

Oil Price reported that, “The UK could be producing 30% more oil from the North Sea in 2030 than previously expected if investments worth some $25 billion (20 billion pounds) are deployed for that purpose.

This is according to Offshore Energies UK, formerly Oil and Gas UK, the industry group that earlier today published its Economy & People Report 2024. In the report, the authority also said that with the right political support, investment in what it calls offshore energy could rise to over $25 billion from $16.5 billion in 2023.”

If anybody had any doubts about Saudi Arabia’s commitment to production cuts, we did have another report yesterday that showed that Saudi Arabia’s crude oil exports in April fell to 6.000 million barrels per day from 6.413 million bpd in March, official data showed on Monday.

Geopolitical risk factors continue to rise under the Biden administration. There was a New York Times report that Vladimir Putin was open to peace deal in 2022 but it was slammed down by the Biden administration. That is something we have heard before and it makes you wonder whether the war in Ukraine really had to get to the point where it is today. It also makes you wonder about all the lives and the billions of dollars that could have been saved. The New York Times wrote that, “the draft included limits on the size of the Ukrainian armed forces and the number of tanks, artillery batteries, warships and combat aircraft the country could have in its arsenal. The Ukrainians were prepared to accept such caps but sought much higher limits.

A former senior U.S. official who was briefed on the negotiations, noting how Russian forces were being repelled across northern Ukraine, said Mr. Putin seemed to be “salivating” at the deal. American officials were alarmed at the terms. In meetings with their Ukrainian counterparts, the senior official recalled, “We quietly said, ‘You understand this is unilateral disarmament, right?"

Now Reuters is reporting that Russian President Vladimir Putin vowed on Tuesday to deepen trade and security ties with North Korea and to support it against the United States, as he headed to the reclusive nuclear-armed country for the first time in 24 years. The U.S. and its Asian allies are trying to work out just how far Russia will go in support of North Korean leader Kim Jong Un, whose country is the only one to have conducted nuclear weapon tests in the 21st century.

This comes as South Korea’s military fired warning shots after North Korean soldiers crossed the Military Demarcation Line in the border area between the two Koreas on Tuesday, according to the country’s Joint Chiefs of Staff (JCS). Some 20 to 30 soldiers breached the line by 20 meters (65 feet) which runs through the middle of the demilitarized zone (DMZ) on Tuesday morning and briefly moved back north after warning shots were fired by the South, according to a JCS official as repoted by Reuters.

This week because of the Juneteenth holiday, we’re going to see a delay on the Energy Information Administration report. We will get the American Petroleum Institute report and while it’s been differing from the EIA we expect to see a pretty good drawdown in crude oil inventories today. We think the supply tightening is going to start to show up in the numbers and that should support prices.

I think it’s another reason why oil prices are up over 7% on the year and the front month got back above $80.00 a barrel on the West TX intermediate. We continue to get mixed signals on gasoline demand which signals consumers are struggling with high inflation, but we did see the market bounce back up yesterday signaling that maybe we’re seeing a bottom. Working to tighten and we are continuing to see concerns about gasoline demand even though it has rebounded.

John Kemp at Reuters writes, “U.S. TRAFFIC VOLUMES have rebounded but remain well below the pre-pandemic trend, which helps explain the relatively anemic consumption of gasoline. U.S. motorists drove 273 billion vehicle-miles in April 2024 at a seasonally adjusted rate, up from 270 billion in April 2023 but essentially unchanged since April 2018. Traffic volumes are increasing well under 2% per year – not enough to increase petroleum consumption, given the rise in ethanol blending, the growing number of hybrid and battery electric vehicles, and improvements in engine fuel efficiency.

Traders will also be watching weather developments in the Gulf of Mexico and the Atlantic. Fox Weather is reporting that, “There is a potential Tropical Cyclone One formed Monday in the Gulf of Mexico and could be on its way to becoming the first named tropical system of the 2024 Atlantic hurricane season. A potential tropical cyclone is a designation used by the National Hurricane Center to indicate a disturbance that is not yet a tropical storm but has the potential to bring that kind of weather to the U.S. within 48 hours. Potential Tropical Cyclone One is forecast to bring heavy rain and coastal flooding to much of the Texas Gulf Coast even though the center of the storm likely won’t make landfall in the U.S. The system is expected to strengthen and would likely get the first name on the list for the 2024 season – Alberto. Here’s everything you need to know about Potential Tropical Cyclone One.

Fox Weather that Potential Tropical Cyclone One is in the Bay of Campeche in the southern Gulf of Mexico. A Tropical Storm Warning has been issued for the Texas coast from Port O’Connor to the mouth of the Rio Grande. A Tropical Storm Watch has been issued for parts of Mexico’s coast. A Flood Watch has been issued in parts of Texas, where heavy rain is forecast. The watch stretches from Beaumont to Corpus Christi and inland to Laredo and includes the Houston metro area. Potential Tropical Cyclone One is expected to become a tropical storm by Wednesday and make landfall in Mexico late Wednesday.

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