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The Energy Report: Russia Rumors

By Phil FlynnCommoditiesJun 01, 2022 10:32AM ET
www.investing.com/analysis/the-energy-report-russia-rumors-200625186
The Energy Report: Russia Rumors
By Phil Flynn   |  Jun 01, 2022 10:32AM ET
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The EU got its to act together and finally came up with a plan to ban Russian oil and, more importantly, make it illegal to ensure tankers carrying Russian crude, but it was not enough to keep oil from correcting after its 6-month bull run, and it was not enough to stop a huge jump in the national average regular gas price.

Reuters reported that Lloyd’s of London, the world’s oldest insurance market, said on Wednesday that it was working closely with British and international governments and regulators to implement global sanctions against Russia. “Lloyd’s supports and remains focused on the delivery of a global sanctions regime against the Russian state,” Lloyd’s said. The Financial Times reported late on Tuesday that Britain and the European Union had agreed on a coordinated ban on insuring ships carrying Russian oil to shut Moscow out of Lloyd’s insurance market.

Oil prices took a late hit as the end of the month profit taking by commodity funds was pushed along with Russian rumors and its standing in the OPEC cartel. Some OPEC members are exploring the idea of suspending Russia’s participation in the alliance’s oil-production deal as Western sanctions, and a partial European ban begin to undercut Moscow’s ability to pump more, the Wall Street Journal reported.

Barani Krishnan of Investing.com wrote that oil consumers — and market bears — may be getting a little of what they want.

The Journal reported, citing OPEC sources familiar with the move:

“Exempting Russia from its oil-production targets could potentially pave the way for Saudi Arabia, the United Arab Emirates, and other producers in the Organization of the Petroleum Exporting Countries to pump significantly more crude, something that the U.S. and European nations have pressed them to do as the invasion of Ukraine sent oil prices soaring above $100 a barrel.”

The news swiftly cut oil prices down from their highs on Tuesday, reversing a four-day rally.

Yet it did not stop retail gas prices from surging overnight. Triple-A reported that the retail price of gasoline hit a record $4.671 a gallon. The surge came as the U.S. saw better than expected demand for U.S. drivers, as well as the fact that we have seen a big reduction in refining capacity because of ESG policies. The spike overnight came as demand for gas held up better than expected, and some refining issues. The Keystone Pipeline oil would have helped along with the oil it would have moved. Oh, I forgot – USA Today fact-checked that and said it would not matter to gas price even though markets are forward-looking. Or they fact-checked that the drilling moratorium and reversing Trump era streamlining rules on pipeline drilling and production rules would have no impact on price.

Dan Molinski reported that:

“Phillips 66 (NYSE:PSX) said Tuesday it would begin some seasonal tune-up activities Tuesday afternoon at its Borger refinery in the Texas panhandle and that the work would be completed by Friday afternoon. The Borger refinery has scheduled maintenance for Unit 40 FCCU [fluid catalytic cracking unit] Electrostatic Precipitators.

During the process, there may be periods of excess opacity and particulate matter.“

The 150,000 barrel a day Borger refinery is located northeast of Amarillo.

China is starting to unlock along with more stimuli, and that can give us another surge in demand. The Guardian reported that the Chinese city of Shanghai, the country’s economic center and a global tra Dan de hub, has eased Covid curbs after a two-month lockdown. At midnight local time (16:00 GMT Tuesday), restrictions were relaxed to allow most people to move freely around the city of some 25 million people. But at least 650,000 residents will remain confined to their homes. China’s overall policy of “zero Covid” remains in place, and people catching Covid face quarantine or hospital.

Natural gas has pulled back as the weather has eased, but US exports are on a tear. Bloomberg News reports that natural gas exports from the US are soaring amid a global shortage of fuel, but traders are betting that producers in one of the biggest shale basins will be selling their supply at a discount next year. The culprit: A lack of pipelines.

Companies including Kinder Morgan Inc (NYSE:KMI)., Energy Transfer (NYSE:ET) LP and MPLX (NYSE:MPLX) LP, which own and operate massive networks of conduits stretching from coast to coast, are proposing or moving ahead with projects that would collectively move almost 6 billion cubic feet of additional gas to terminals shipping liquefied natural gas from the Gulf Coast. That’s equivalent to nearly 6% of current U.S. gas production. The pipelines will lift U.S. gas exports to a fresh record and help tame prices in Asia and Europe, which have been running red-hot since Russia’s invasion of Ukraine.

Now that Joe Biden has emptied the U.S. strategic petroleum reserve, what will he do for an encore?

Make no mistake about it, you can point to a lot of different things for the increase in the cost of oil and crude, but at the end of the day, Biden still owns this oil and gas price spike. Biden came into office promising that he would raise away on gas prices to get us off fossil fuels, and he has delivered. His energy secretary, Jennifer Granholm, was bragging that she could drive her leased Chevy Volt and power it with some panels that she’s resting on top of her house.

No doubt those solar panels were most likely made in China and probably were made with toxic materials. Yet while Americans are suffering from inflation and record-breaking prices, she is giddy because she says she is driving on sunshine. President Biden’s Treasury Secretary admits that she got it wrong.

OPEC meets tomorrow! The trade will keep an ear to the ground to see if there is anything that is bearish that comes out of it. I do not think there will be, so buy the breaks. You can check out my trade levels. Also, if you are having a hard time with your trading or you missed this move, call me. We have been recommending hedges for the last few years, and if you did, it paid off.

The Energy Report: Russia Rumors
 

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The Energy Report: Russia Rumors

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Mohd Izhar Muslim
Mohd Izhar Muslim Jun 02, 2022 3:11AM ET
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