Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

The Energy Report: Power Hungry!

By Phil FlynnCommoditiesJul 27, 2021 08:01AM ET
www.investing.com/analysis/the-energy-report-power-hungry-200593873
The Energy Report: Power Hungry!
By Phil Flynn   |  Jul 27, 2021 08:01AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

The U.S. has gone power-hungry, consuming record and near-record amounts of gasoline and natural gas. Yet at the same time, we’re having issues meeting demand. Fuel shortages and the lack of qualified oil tank truck drivers, are causing shortages at airports. The situation has got so bad that American Airlines (NASDAQ:AAL) is asking pilots to conserve fuel. Some planes will have extra fuel because they are afraid that when they land at the airport, there may not be enough fuel to allow for the turn around trip. Bloomberg reported that American and Southwest Airlines (NYSE:LUV) are carrying extra jet fuel on some flights and considering adding stops to other routes to pick up fuel, as snarls in US trucking and supply chains delay deliveries to small and mid-sized airports across the country.

Reuters reports that the Texas power grid operator on Monday forecast demand would reach a record high over the next week as homes and businesses crank up their air conditioners to escape a heatwave settling over the state. It is not just the US. Javier Blas reports that European natural gas prices hit fresh highs after a brief retreat earlier this month. In the UK, NBP gas has jumped to its highest level in more than 15 years. In continental Europe, Dutch TTF is very close to setting a new record high.

While a lot of these issues are related to the weather, the pandemic and the reopening, there is also bad government policy as a factor in these shortages. Get ready for a world of less reliability and more shortages as we speed into a fossil fuel transition and our economy is going to feel the pain. With Biden’s and some state’s rigid energy plans, they are going to put the US at more of a disadvantage to other countries and make us less competitive.

Especially when it comes to computer games. The Register reports that Dell is no longer shipping energy-hungry gaming PCs to certain states in America because they demand more energy than local standards allow. Customers seeking to purchase, for example, an Alienware Aurora Ryzen Edition R10 Gaming Desktop from Dell’s website and have it shipped to California are now presented with a message that tells buyers they’re out of luck. “This product cannot be shipped to the states of California, Colorado, Hawaii, Oregon, Vermont, or Washington due to power consumption regulations adopted by those states,” the website says. “Any orders placed that are bound for those states will be canceled,” Dell confirmed to The Register that the California ban was down to power consumption regulations, saying:

Yes, this was driven by the California Energy Commission (CEC) Tier 2 implementation that defined a mandatory energy efficiency standard for PCs – including desktops, AIOs, and mobile gaming systems. This was put into effect on July 1, 2021. Select configurations of the Alienware Aurora R10 and R12 were the only impacted systems across Dell and Alienware.”

Despite all the drama, oil futures are in a pretty tight trading range but holding pretty solid. The market seems to have overcome the sharp correction down to $65.00 and now is trying to break back out above the $72.48 area. We fully expect that we should break out to the upside above that 7248 area and if we do, we’re probably going to be on track to make new contract highs. The problem right now seems to be the delta variant of the coronavirus, which is holding the market back even though all the evidence right now suggests a dramatic tightening of supplies. The oil market is still hesitant to go further until we ease concerns about the coronavirus and this new delta variant. And while the delta variant may impact demand at some point, we’re not really seeing a lot of evidence of that right now. In fact if the Delta variant is having any impact on demand, for this moment it’s only cooling off a demand that is already strong. It’s hard to separate how much demand destruction there is because the demand growth is so strong. In this situation, I would be prepared for some upside price risk.

We’re not seeing much science and demand destruction for gasoline even as prices have leveled out of a national average somewhere around $3.15 a gallon. The market is still trying to adjust near record-breaking demand at a time when there is reduced refining capacity. US energy production is less than it was the last time demand was this high.

RBOB gasoline and distillate fuel futures are looking very solid as well. We already talked about the shortages of supplies at airports for jet fuel that is covered in the distillate category. Part of it is transportation issues but part of it is supplies that are below average for this time of year.

The market is going to take its cue from the American Petroleum Institute supply report today we expect to see substantial drawdowns in Cushing, Oklahoma as well as the overall crude supply. Both gasoline and diesel should drop. Demand is strong, supplies are tight and we should continue to see supply fall below the five-year average.

The natural gas market is speaking for itself. Record power generation is driving prices up. We already are facing a storage deficit for natural gas as supplies are 16.6% below last year and 6.29% below the five-year average and with the heatwave, we probably are going to see that storage deficit widened dramatically in the coming weeks. Longer-term outlook for the weather is very bullish for natural gas. Bret Walts at Banwx says that Iowa has barely seen any rain the last 10 days, with surrounding areas running less than 1″. Combine that with near record-breaking heat and by Wednesday conditions are going to be drying out quickly. This is going to have a major impact on grain prices as we are at the critical development stages for corn. It’s probably a good thing that the Biden administration is allowing less corn in our gas tanks but at the same time, it doesn’t take away from the fact that we’re seeing one of the tightest markets in corn that we’ve seen in many, many years.

The Energy Report: Power Hungry!
 

Related Articles

Satendra Singh
Natural Gas: Anxiety At High Pitch By Satendra Singh - Sep 27, 2021 7

Natural gas prices surged in response to increasing signs of a global energy shortage at the start of the northern hemisphere winter heating season. Futures started this week with...

The Energy Report: Power Hungry!

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email