The Phil Flynn Energy Report
There’s so much news, most of it bullish for the oil and gas markets— it's hard to keep up, but we’ll give it our best effort.
Oil and natural gas prices are soaring and things are getting so dramatic that even Goldman Sachs has joined our call for consumers of natural gas to buy protection. In other words, Goldman Sachs is seeing what we've been saying for months, that we have a potential structural shortage of natural gas going into winter. Unless energy and shale producers can dramatically increase production, this global deficit of natural gas could become a major issue this winter.
Oil prices also are getting support from data out of the American Petroleum Institute (API). This data shows that crude oil inventories fell by 5.437 million barrels and supplies in the Cushing, OK storage hub fell by 1.345 million barrels. We also have a big 2.761 million barrel drop in gasoline supplies and a 2.88 million barrel drop in distillate supplies.
These draws and inventories are just the beginning and we should see bigger draws of gasoline and distillate supplies in the coming weeks. In the Energy Information Administration petroleum status report, we may even see larger-than-expected draws, more so than we saw in the API report. If that’s the case, we would expect that oil and products would continue adding onto the rally that we’ve seen in overnight trading.
Recovery in the Gulf of Mexico from Hurricane Ida and now by Hurricane Nicholas is still slow. The Bureau of Safety and Environmental Enforcement reports that 39.57% of Gulf oil production is still shut in; that’s the equivalent of 720,217 barrels per day (bpd). 48.20% of natural gas production is still shut as well, driving panic buying of natural gas.
Natural gas prices in Europe were surging again this morning— here in the United States, we all know that these record-breaking prices of natural gas in Europe are being caused by bad energy policy. The United States looks like it wants to repeat the same mistakes Europe has, the mistakes that brought them sharply higher heating bills, utility bills, and gasoline prices.
The International Energy Agency (IEA)is echoing something we've been saying for some time: the lack of investment in traditional fossil fuels projects is impacting global energy supply, especially oil and natural gas. The IEA, one of the big proponents of a quick switch to green energy, is starting to tell the world that the lack of investment is already costing the poor and the middle class a lot of money.
The Department of Energy reports:
Hurricane Ida resulted in service outages for up to 1.2 million electricity customers across eight states, according to situation reports from the U.S. Department of Energy’s Office of Cybersecurity, Energy Security, and Emergency Response (CESER). Hurricane Ida made landfall on the afternoon of Sunday, August 29, as a Category 4 storm near Port Fourchon, Louisiana. The hurricane initially caused more than one million customer outages in Louisiana, Mississippi, and Alabama. As the storm continued toward the Northeast, it caused outages in several northeastern states on September 1.
Reports are also saying that travel demand in Europe is back to pre-pandemic levels and that demand in India is stronger than expected.
China reports that they slowed down refining activity in August, which is a little bit disappointing. It’s widely known that China will tap their strategic petroleum reserve for more oil, but we know that will backfire in the long run. China will have to replace those barrels and simultaneously release more oil to the market in an effort to alleviate a short squeeze. That will only add to the demand side of the equation and make supplies tighter.
Iran nuclear deal hopes took a giant step back. Not only was Iran accused yesterday of harassing International Atomic Energy agency women, but now Argus reports that their top nuclear negotiator with world powers must step down. Argus reports that Iran's foreign minister Hossein Amir-Abdollahian has named senior conservative diplomat Ali Baqeri-Kani as his new deputy, replacing the more pragmatic Abbas Araqchi.
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