The crude oil market is taking a hit with reports that President Donald Trump and First Lady Melania Trump tested positive for Covid 19. That report creates a new round of market uncertainty and reinforcing fears of a second wave of the virus, which will harm the economy and projected energy demand. Broader implications of the diagnose for energy, not only for the short term but for the long-term, cannot be understated.

The shale industry, of course, would be under assault by a Biden Presidency. No other Presidential candidate has ever been more hostile to fossil fuels. Restrictions on U.S production would be very bullish for prices. It has been the U.S. shale producer that has been the main reason global energy prices have been low and why inflation pressures have been muted even though international central banks have flooded the globe with stimulus. The importance of the U.S. shale industry to the global economy has been under appreciated.

Second wave covid fears along with fears of more oil output from Libya and Saudi Arabia are concerning the market. Market watch reported that new rules in Spain mean that most of the country’s regions will limit public service and retail to 50% capacity. At the same time, France may introduce new restrictions on Thursday night. Per person, Spain, France, and the Netherlands have the highest rate of new cases over the last seven days of the world’s largest countries, according to data tabulated by Deutsche Bank.

This makes the new oil volume coming from Libya a problem. Bloomberg reported that Saudi Arabia increased oil shipments in September, offsetting lower flows from the United Arab Emirates as the smaller nation started to compensate for earlier over-production, and leaving exports from OPEC’s Middle East producers broadly stable for a third month.

Exports from Saudi Arabia rose by more than 480,000 barrels a day, almost precisely offsetting the drop in shipments from the UAE last month. Kuwait and Iraq increased flows by smaller amounts. The four nations shipped a total of 13.61 million barrels a day of crude and condensate last month, up by 164,000 barrels a day from August, tanker-tracking data monitored by Bloomberg show.

In Japan though, old man winter is increasing! S&P Global Platts reports that Japan is set to lift refinery runs as colder-than-average winter calls for ample kerosene output. Dec-Feb temperatures set to fall below the 30-year average in Japan, and South Korean kerosene suppliers aim to boost sales to Japan. Higher run rates may lead to lower gasoline imports. Japan’s refinery runs will “likely recover from current levels during winter” because refiners will increase kerosene production to meet heating demand, the Petroleum Association of Japan President Tsutomu Sugimori said Sept. 17. Japan’s refinery runs have declined sharply in recent months because of plummeting jet fuel demand amid border restrictions in light of the coronavirus pandemic.
Thanks,
Phil Flynn

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