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Tuesday, February 14, 2023 10:34:08 AM
Front Loaded. The Energy Report
By: Phil Flynn | February 14, 2023
The Biden administration is front-loading the 26 million barrels in US Strategic Petroleum Reserve crude oil sales using smoke and mirrors as this administration is running out of both.
In an act of desperation, the Biden administration pulled forward barrels of SPR oil that were going to be released later and instead rolled the sale forward so they can be released between April and June. This is a desperate attempt to keep oil and gasoline prices from surging. While that might sound like a noble endeavor, the Biden administrations’ interference in the marketplace is only going to create a situation where supplies are much tighter down the road and gas prices are higher.
Maybe the move was in response to the Russian oil production cut or more than likely it was because Biden knows that there is nothing that can zap a President’s popularity more than rising gas prices. This is especially true when it comes to this President as he has directly had a hand in making it harder to produce oil and gas in this country.
Fox Business reported, “Unlike the largest-ever drawdown of the SPR that Biden announced in response to Russia’s war in Ukraine, the latest release of 26 million barrels is in response to a requirement included in two laws enacted by Congress during the Obama administration under the Bipartisan Budget Act of 2015 and the Fixing America’s Surface Transportation (FAST) Act. The announcement comes ahead of a potential uptick in gas prices as the U.S. nears the summer driving season.
“Biden is front-loading SPR barrels to avoid a summer gasoline price spike,” said Phil Flynn, analyst Price Futures Group and FOX Business Network contributor. “There are growing concerns among the Biden administration that gas prices are headed back to $4.00 a gallon and the president is fearful of the political heat he will have to take.”
Yet despite the administration bragging about how they were able to sell oil out of the reserve at over $100 a barrel, they have failed totally in their plan to buy oil back below $70 a barrel. Javier Blas of Bloomberg Pointed out that, “It increasingly looks like the Biden administration missed the window to buy oil for the SPR. US officials said they wanted to see prices in the $67-$72 range. WTI is not trading at $72 until January 2025. And the benchmark is not trading below $67 until March 2026. Yet they say they still have the plan to buy back the oil that they mortgaged from taxpayers’ future.
Reuters reports that, “the Department Of Energy said it is implementing a three-part strategy to refill the reserve in the long term, including repurchases with revenues from emergency sales, returns of more than 25 million barrels of oil from previous exchanges, and working with Congress to avoid “unnecessary sales unrelated to supply disruptions to strategically maintain volume. Reuters pointed out that last month the department rejected the first batch of bids from oil companies to sell back up to 3 million barrels to the reserve, saying it would only accept bids for oil meeting required specifications at a price that was a “good deal” for taxpayers. The administration had been seeking to repurchase oil for the stockpile at about $70 a barrel.
The other question is whether this oil is going to be exported to places like China. Right now, despite the fact that Fox Business Network pointed out that, “The Republican House recently passed a pair of bills putting conditions on future sales from the SPR, including a prohibition on selling SPR oil to the Chinese government or companies it controls, and a bill that would require the development of a plan to make more federal lands available for oil and gas leasing prior to a non-emergency drawdown of the SPR. The former passed with a broadly bipartisan vote of 331-97, while the latter advanced along party lines following a 220-205 vote. Yet the bill has not been signed and unless it is, more than likely, China will be a destination for this taxpayer-paid for oil. The other question is whether this oil is going to be sweet or sour. US refiners covet the supply of sour crude.
Yet for oil, they may shake off this attempt by Biden to lower gas prices if the Inflation data comes out weak. Market watch reports that the CPI data for January 2023 will be a key indicator for the market observers, analysts, investors and traders to gauge the level of price rise in the economy. The US Bureau of Labor Statistics (BLS) will release the January inflation numbers on February 14 at 8:30 A.M. Eastern Time. They point out that for the first time, a new approach is to be applied when generating January CPI data that will be reflected in US inflation figures. Beginning in 2023, the Bureau of Labor Statistics will change the method of calculating inflation data. The release of the January 2023 CPI data on Friday, February 14, 2023, will mark the start of the transition to yearly weights.
The title of the cable and satellite television service index is being changed to cable, satellite, and live streaming television service. The title of the video discs and other media, including rental of video index is being changed to purchase, subscription, and rental of video. The title of the rental of video discs and other media index is being changed to subscription and rental of video and video games. The title of the baby food index is being changed to baby food and formula.
Market Watch says that from 7.1% in November, the inflation fell to 6.5% in December and now the stock market investors expect the annual inflation to trend even lower as has been seen over the last few months. However, any negative surprise may spook the market sentiments. Meanwhile, Fed Chief Powell has been talking about ‘disinflation’ but the strong job market may play the spoilsport in Fed’s action plan. Fed officials remain hawkish and they have already pointed towards more rate hikes unless inflation is fully controlled and brought under target range of 2%.
US oil production may be rising but the production per well is plateauing. That is a concern for future prices. The EIA Rig Productivity Projection forecasts New Well oil production per rig at: 1,705 bpd for Bakken (vs 1,704 bpd month ago); 1,060 bpd for Permian (vs 1,061 bpd month ago); 1,469 bpd for Eagle Ford (vs 1,486 bpd month ago). EIA Projection: US total Shale regions oil production for March seen up about 74,000 bpd at 9.356 mln bpd (vs 81,000 bpd rise in February). EIA Projection: US Bakken oil production for March seen up 21,000 bpd at 1.199 mln bpd (vs 22,000 bpd rise in February).Bakken Crude output is due to rise in March to the highest since December 2020. IA Projection: US Eagle Ford oil production for March seen up 3,800 bpd at 1.18 mln bpd (vs 5,600 bpd rise in February) – EIA.
Eagle Ford crude output in March is due to rise to its highest since April 2020. EIA Projection: US Permian Basin oil production for march seen up 29,000 bpd at 5.682 mln bpd (vs 30,000 bpd rise in February).
To keep production rising in these basins the Biden administration had better change course or we are entering a new era of sky-high energy prices. Forget about the short term impact of this oil. The reality is that this oil will be soaked up quickly. This is not going to have the same impact the 180million barrel release had. And it only will add to our pain down the road.
Scott DiSavino of Reuters reported that, “Freeport LNG sought permission from federal regulators on Monday to restart commercial operations at its long-idled liquefied natural gas (LNG) export plant in Texas, a move that could soon provide the world with another much-needed source of the super-cooled fuel. The amount of gas flowing from U.S. pipelines to Freeport jumped on Monday to its highest since the facility was shut by a fire in June 2022 after the company restarted one of the plant’s three liquefaction trains, which turn gas into LNG for export.
Breaking OPEC says World oil demand will rise by 2.32 million bpd in 2023 (up 100,000 bpd from the previous forecast).
Read Full Story »»»
DiscoverGold
By: Phil Flynn | February 14, 2023
The Biden administration is front-loading the 26 million barrels in US Strategic Petroleum Reserve crude oil sales using smoke and mirrors as this administration is running out of both.
In an act of desperation, the Biden administration pulled forward barrels of SPR oil that were going to be released later and instead rolled the sale forward so they can be released between April and June. This is a desperate attempt to keep oil and gasoline prices from surging. While that might sound like a noble endeavor, the Biden administrations’ interference in the marketplace is only going to create a situation where supplies are much tighter down the road and gas prices are higher.
Maybe the move was in response to the Russian oil production cut or more than likely it was because Biden knows that there is nothing that can zap a President’s popularity more than rising gas prices. This is especially true when it comes to this President as he has directly had a hand in making it harder to produce oil and gas in this country.
Fox Business reported, “Unlike the largest-ever drawdown of the SPR that Biden announced in response to Russia’s war in Ukraine, the latest release of 26 million barrels is in response to a requirement included in two laws enacted by Congress during the Obama administration under the Bipartisan Budget Act of 2015 and the Fixing America’s Surface Transportation (FAST) Act. The announcement comes ahead of a potential uptick in gas prices as the U.S. nears the summer driving season.
“Biden is front-loading SPR barrels to avoid a summer gasoline price spike,” said Phil Flynn, analyst Price Futures Group and FOX Business Network contributor. “There are growing concerns among the Biden administration that gas prices are headed back to $4.00 a gallon and the president is fearful of the political heat he will have to take.”
Yet despite the administration bragging about how they were able to sell oil out of the reserve at over $100 a barrel, they have failed totally in their plan to buy oil back below $70 a barrel. Javier Blas of Bloomberg Pointed out that, “It increasingly looks like the Biden administration missed the window to buy oil for the SPR. US officials said they wanted to see prices in the $67-$72 range. WTI is not trading at $72 until January 2025. And the benchmark is not trading below $67 until March 2026. Yet they say they still have the plan to buy back the oil that they mortgaged from taxpayers’ future.
Reuters reports that, “the Department Of Energy said it is implementing a three-part strategy to refill the reserve in the long term, including repurchases with revenues from emergency sales, returns of more than 25 million barrels of oil from previous exchanges, and working with Congress to avoid “unnecessary sales unrelated to supply disruptions to strategically maintain volume. Reuters pointed out that last month the department rejected the first batch of bids from oil companies to sell back up to 3 million barrels to the reserve, saying it would only accept bids for oil meeting required specifications at a price that was a “good deal” for taxpayers. The administration had been seeking to repurchase oil for the stockpile at about $70 a barrel.
The other question is whether this oil is going to be exported to places like China. Right now, despite the fact that Fox Business Network pointed out that, “The Republican House recently passed a pair of bills putting conditions on future sales from the SPR, including a prohibition on selling SPR oil to the Chinese government or companies it controls, and a bill that would require the development of a plan to make more federal lands available for oil and gas leasing prior to a non-emergency drawdown of the SPR. The former passed with a broadly bipartisan vote of 331-97, while the latter advanced along party lines following a 220-205 vote. Yet the bill has not been signed and unless it is, more than likely, China will be a destination for this taxpayer-paid for oil. The other question is whether this oil is going to be sweet or sour. US refiners covet the supply of sour crude.
Yet for oil, they may shake off this attempt by Biden to lower gas prices if the Inflation data comes out weak. Market watch reports that the CPI data for January 2023 will be a key indicator for the market observers, analysts, investors and traders to gauge the level of price rise in the economy. The US Bureau of Labor Statistics (BLS) will release the January inflation numbers on February 14 at 8:30 A.M. Eastern Time. They point out that for the first time, a new approach is to be applied when generating January CPI data that will be reflected in US inflation figures. Beginning in 2023, the Bureau of Labor Statistics will change the method of calculating inflation data. The release of the January 2023 CPI data on Friday, February 14, 2023, will mark the start of the transition to yearly weights.
The title of the cable and satellite television service index is being changed to cable, satellite, and live streaming television service. The title of the video discs and other media, including rental of video index is being changed to purchase, subscription, and rental of video. The title of the rental of video discs and other media index is being changed to subscription and rental of video and video games. The title of the baby food index is being changed to baby food and formula.
Market Watch says that from 7.1% in November, the inflation fell to 6.5% in December and now the stock market investors expect the annual inflation to trend even lower as has been seen over the last few months. However, any negative surprise may spook the market sentiments. Meanwhile, Fed Chief Powell has been talking about ‘disinflation’ but the strong job market may play the spoilsport in Fed’s action plan. Fed officials remain hawkish and they have already pointed towards more rate hikes unless inflation is fully controlled and brought under target range of 2%.
US oil production may be rising but the production per well is plateauing. That is a concern for future prices. The EIA Rig Productivity Projection forecasts New Well oil production per rig at: 1,705 bpd for Bakken (vs 1,704 bpd month ago); 1,060 bpd for Permian (vs 1,061 bpd month ago); 1,469 bpd for Eagle Ford (vs 1,486 bpd month ago). EIA Projection: US total Shale regions oil production for March seen up about 74,000 bpd at 9.356 mln bpd (vs 81,000 bpd rise in February). EIA Projection: US Bakken oil production for March seen up 21,000 bpd at 1.199 mln bpd (vs 22,000 bpd rise in February).Bakken Crude output is due to rise in March to the highest since December 2020. IA Projection: US Eagle Ford oil production for March seen up 3,800 bpd at 1.18 mln bpd (vs 5,600 bpd rise in February) – EIA.
Eagle Ford crude output in March is due to rise to its highest since April 2020. EIA Projection: US Permian Basin oil production for march seen up 29,000 bpd at 5.682 mln bpd (vs 30,000 bpd rise in February).
To keep production rising in these basins the Biden administration had better change course or we are entering a new era of sky-high energy prices. Forget about the short term impact of this oil. The reality is that this oil will be soaked up quickly. This is not going to have the same impact the 180million barrel release had. And it only will add to our pain down the road.
Scott DiSavino of Reuters reported that, “Freeport LNG sought permission from federal regulators on Monday to restart commercial operations at its long-idled liquefied natural gas (LNG) export plant in Texas, a move that could soon provide the world with another much-needed source of the super-cooled fuel. The amount of gas flowing from U.S. pipelines to Freeport jumped on Monday to its highest since the facility was shut by a fire in June 2022 after the company restarted one of the plant’s three liquefaction trains, which turn gas into LNG for export.
Breaking OPEC says World oil demand will rise by 2.32 million bpd in 2023 (up 100,000 bpd from the previous forecast).
Read Full Story »»»
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