There’s a lot to be thankful for in the Energy Report world this year.
Not only do we have at least a ceasefire agreement between Israel and Hezbollah giving us a ray of hope that maybe we can find a way out of the vicious cycle of war that has plagued the world over the last four years, we are also thankful for a new President coming in that may bring the US back to common sense energy policies that will help unleash the untapped potential of our economy. And while there seems to be a lot of fear about the Truth Social post that on Trump’s first day in office, he would impose a 25% tariff on all products coming into the United States from Mexico and Canada, the reality is that because everything that he is asking for should be solved before his inauguration.
There was a lot of concern that President Trump might put a tariff on Canadian Oil and Natural Gas. That tariff would be a big problem as it would increase the cost of Gasoline and heating bills. Here in the United States because shale oil is so much lighter, the refiners need heavy Canadian Crude to blend. A a tariff would have been devastating for the cost of production and hurt US refiners. Yet already Prime Minister Justin Trudeau has called President Trump. He most likely will take steps to secure the border ahead of the inauguration.
In fact everything that President Trump is asking for from Canada, Mexico and China is to get back to the way thing were when President Trump left office. Trump pointed out that, “As everyone is aware, thousands of people are pouring through Mexico and Canada, bringing Crime and Drugs at levels never seen before.” Now it’s time that Canada, Mexico and China live up to their responsibility to stop the flow of illegal drugs into this country as well as crime.
When Trump pressured these countries before they acted. After pressure by the Trump administration China took some steps to slow the production of fentanyl by cracking down on some of the bad actors. Mexico was very sensitive to controlling the flow of illegal immigration from their borders. Mainly because they had to house them. Canada as well took steps to secure their border. It’s not like Trump is asking very much to avoid tariffs that can have huge consequences not only for the United States but even worse consequences for Canada, Mexico and China. I think all three countries will take steps to try to step up enforcement and clean up their act ahead of inauguration. So I predict that these threatened tariffs will never happen. In fact, the oil market is acting like these tariffs will never happen.
Biden is also tweeting that, “Over the coming days, the United States will make another push with Turkey, Egypt, Qatar, Israel, and others to achieve a ceasefire in Gaza with the hostages released and an end to the war without Hamas in power.” Let’s pray that the hostages get released.
Despite the reduction in tensions oil is getting a little bit of a boost after a big draw in last night’s American Petroleum Institute (API) supply report.
The API reported that crude supplies fell by a whopping 5.935 million barrels last week that was a substantially larger drop than the 250,000-barrel increase that was expected.
W also saw another big drop of 734,000 barrels at the Cushing OK delivery point.
On the product side we did get a decent increase in distilling inventories as they rose to 2.543 million barrels . That is a good thing because those inventories are still too tight.
Gasoline inventories did rise by 1.814 million barrels ahead of the Thanksgiving Day holiday. The national average came in at $3.07 a gallon according to Triple A. In fact dealer John Kemp of John Kemp Energy pointed out that, “Investors have become bullish about the outlook for U.S. gasoline as inventories have fallen to the lowest seasonal level in a decade, but there was still little positive sentiment towards the rest of the petroleum complex. Hedge funds and other money managers purchased the equivalent of 42 million barrels in the six most important futures and options contracts over the seven days ending on November 19.
The combined position was still only 251 million barrels (5th percentile for all weeks since 2011) with bullish long positions outnumbering shorts.
It was great being on WKRC in Cincinatti with my buddy Kevin Gordan ahead of the Thanksgiving holiday! And no, we were not talking about a Turkey Drop. Yet oil traders know that Thanksgiving could always include a surprise oil drop. My buddy Oliver Sloop over at blue line futures reminded me it was the 10th anniversary of the $10 crude oil drop. I’m Thanksgiving that fateful day a decade ago. That drop of course coincided with a failed OPEC meeting.
As luck would have it OPEC is negotiating today about extending their production cut and if it fails it could lead to another Thanksgiving Turkey oil drop surprise. Actually right now there are some concerns that OPEC is having a difficult time with their extension of the production cut what was thought to be a rubber stamp decision and could provide some drama as countries like Iran ,Kazakhstan and the United Arab Emirates may want a bigger share of the pie. If this deal fails, the market will get punished.
Natural gas is pulling back on profit today after an incredible run driven by weather. The Fox Weather Channel warns that the powerful winter storm packing heavy snow, rain and even severe weather is threatening Thanksgiving travel plans for millions as people across the U.S. to leave home ahead of the holiday to celebrate with friends and family. The coast-to-coast storm began its journey over the weekend when it slammed into the West Coast with torrential rain and heavy mountain snow, impacting communities along the busy Interstate 5 corridor from California to Washington. The storm then pushed off to the east and moved into the Rockies, where it dumped snow in Utah and Colorado.