Oil & Gas - Energy - Commodities - Resources (OILBRENT)

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Gas Demand Gage. The Energy Report
By: Phil Flynn | August 9, 2022

Breaking News – Reuters Reports that Ukraine has suspended Russian oil flows to southern Europe since Aug. 4 because Western sanctions meant it did not receive transit fees from Moscow, Russia’s pipeline monopoly Transneft said on Tuesday. Transneft (TRNF_p.MM) said it made payments for August oil transit to Ukraine’s pipeline operator Ukrtransnafta on July 22, but the money was sent back on July 28 as the payment did not go through. Gazprombank, which handled the payment, said the money was returned because of European Union restrictions, Transneft said in a statement.

Better Check the Gasoline Demand Gage. Are consumers running on empty? Oil prices are starting to get their bearings trying to bottom in a market with low liquidity. Yet it may be weakness in gasoline demand that is really reflecting how Americans feel about the struggling Biden economy.

Oil prices are caught up trying to decide whether they’re more concerned about a looming recession or more concerned about the Fed being aggressive raising interest rates. If the Fed stays aggressive, it will cause an increase in the value of the dollar putting downward pressure on oil prices.

The other concern of course is that stunning 7% weekly drop in gasoline demand reported by the Energy Information Administration (EIA). That was most likely caused by gasoline wholesalers putting off purchases in the hopes that they could buy supply cheaper. Sometimes of course that backfires because if prices spike back up then they may have to purchase more supply at a higher price in the future.

Yet the reality is that the drop in gasoline demand that everybody admits is happening to one degree or another, is a reflection about how Americans are suffering under the Biden economic policies.

The war on fossil fuels and even his new so-called inflation reduction act will only make oil more expensive thereby making gasoline prices more expensive. Also, the Biden crackdown on taxes on small business and new regulations will reduce U.S. oil production in the future.

At least we know that China’s gasoline demand will improve. China has decided to lower retail gas prices! China’s domestic gasoline and diesel prices (standard products) will be reduced by 130 yuan and 125 yuan per ton respectively. I don’t think that is going to help with Biden’s environmental plans.

Gasoline demand is going to be one of the things that we’re going to be looking at with tonight’s American Petroleum Institute (API) report. Traders are going to see if the demand drop corrects itself or is it a sign that US drivers are bucking under the pressure of the most aggressive inflation we have seen since the 1980s.

Some traders talked about the Iran nuclear talks and held out hopes for a deal. Do not bet on it. Apparently, there’s some plan on the table for the Iranians to look at from the Europeans at this point. Our expectations are that Iran is just using these talks to buy more time. It is what they call a final draft to revive the 2015 nuclear deal. Today Iran has already taken a major step to avoid sanctions in the future. Tasnim reported that Iran makes first import order using crypto, worth $10 million dollars.

All of that might be a moot point because at the end of the day global supplies of oil and refining capacity are still very tight despite all the concerns about slowing demand. We are seeing global oil inventories fall, the Strategic Petroleum Reserve releases have flooded the market with oil, but it is yet to stop global oil inventories from tightening. When the market wakes up to the reality that these barrels of oil aren’t going to be dumped onto the market in the winter, we should see solid buying come back in.

As I have pointed out before, the last two weeks of August are seasonally very bullish for oil, gasoline and diesel. This year the move might be bigger than previous years because of the overreaction to recession fears on the downside.

Reuters reports that, “An inferno at Cuba’s largest oil storage facility has killed at least one firefighter, injured many more, and threatens to further swell the fuel import bill for the impoverished island nation that relies on foreign oil for everything from transportation to its power grid. Cuban officials may need to scramble to set up expensive floating storage capacity to handle imports aimed at easing an acute fuel scarcity, sources and experts said on Monday.

Bloomberg News reports that China’s top auditor is conducting a review of the $3 trillion trust industry, paving the way for a potential overhaul of a key shadow banking sector where losses on property loans are mounting. In an unscheduled move, the National Audit Office — which previously led an examination of bank exposures to Jack Ma’s Ant Group Co. — has for the past month been inspecting the books of at least 20 trust firms, including the top five, to gauge the risks they pose to financial stability, according to people familiar with the matter.

Biden is probably watching this matter with great interest. Besides he has going to hire a bunch of IRS agents with a bunch of weapons. Maybe we can go back and audit the tax returns of the Tea Party like they did under Obama.

Natural gas pulled back on weather forecasts showing some moderation in the heat. Yet the longer-term outlook still looks bullish. One of the things we must keep our eye on in this market is the storm that has developed in the Atlantic Ocean. The National Hurricane Center reports that, “A tropical wave continues to produce a large area of is organized cloudiness and thunderstorms over the eastern tropical Atlantic a few hundred miles south-southwest of the Cabo Verde Islands. Gradual development of this system is possible, and a tropical depression could form around the middle to latter portion of the week before environmental conditions become less favorable by this weekend. This system is expected to move westward to west-northwestward at 15 to 20 mph across the tropical Atlantic during the next several days.

* Formation chance through 48 hours…low…20 percent. * Formation chance through 5 days…medium…40 percent.

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