Oil prices are giving back their MLK Day gains because of the disruptions that caused the spike. The impact on oil supply is believed to be transient. A politically motivated shutdown in Libya and a strike by security guards in Iraq could be solved very quickly. Oil prices surged as oil supply was cut-off from both Libya and Iraq, yet because it may come back online quickly, the market is putting it in perspective. President Trump, at the World Economic Forum in Davos, is talking about the U.S. energy revolutions and the possibilities of unlimited energy supply. Yet a Chinese virus may hurt Lunar New Year travel demand, and the World Health Organization announced it would convene an emergency committee meeting on Wednesday to determine whether the outbreak warrants being declared a global health crisis.

President Trump Rocked Davos. Trump said, “The U.S. is in the midst of an economic boom, the likes of which the world has never seen before. We’ve regained our stride, rediscovered our spirit, and reawakened the powerful machinery of U.S. enterprise. The U.S. is thriving, flourishing and yes, the U.S. Is winning again.” Trump spoke about the U.S. energy revolution and spoke of the benefits of that revolution to people around the globe. Trump said the U.S. was committed to “ensuring the majesty of God’s creation,” but added that “now is not the time for pessimism”. “We must reject the perennial prophets of doom and their predictions of the apocalypse. They are the heirs of yesterday’s foolish fortune tellers.”

Trump went on to say that, “They predicted an overpopulation crisis in the ’60s, mass starvation in the ’70s, and an end of oil in the 1990s. These alarmist always demand the same thing: absolute power to dominate, transform, and control every aspect of our lives. We will never let radical socialists destroy our economy, wreck our country, or eradicate our liberty.”

It is the courage to call out the “radical socialists” that is leading to his impeachment. It is the courage to call out the hypocrisy of government and dare to solve problems and not exploit them for political gain.

The FT reported that, “Khalifa Haftar, the military strongman trying to seize political power in Libya, has halted oil shipments from ports under his control as he attempts to gain leverage ahead of peace talks in Berlin on Sunday. At least 800,000 barrels a day of crude supplies worth roughly $55m per day, the economic lifeblood of the country, have been halted, according to the National Oil Corporation (NOC), the state-owned oil company. The land was pumping around 1.3m b/d previously. The state oil company said that, “LNA general command and the Petroleum Facilities Guard of the central and eastern regions had instructed the management of NOC subsidiaries — Sirte Oil Company, Harouge Oil Operations, Waha Oil Company, Zueitina Oil Company, and Arab Gulf Oil Company — to halt exports from Brega, Ras Lanuf, Hariga, Zueitina, and Sidra ports. NOC declared force majeure on oil exports from the five ports.” Bloomberg reported that, “Khalifa Haftar kept virtually all of the nation’s oil fields shut, in a show of defiance after world leaders failed to persuade him to sign a peace deal ending the OPEC country’s civil war.”

Oil is bottoming at the bottom of the range. Short term seasonality, along with warmer weather, is working against it, yet the U.S.-China trade deal, along with strong economic momentum, should show some uptick in overall demand. Global supplies of oil, despite talk of a glut, are tightening. Saudi crude inventories fell by 1.065mb m/m to 167.013mb in November according to JODI.

RBOB supply has been brimming, and that has, in turn, caused gas prices to fall. Gas Buddy reported that the national average cost of gasoline has fallen 2.0 cents per gallon in the last week and stands at $2.55 per gallon today collected from data compiled from more than 11 million individual price reports covering nearly 151,150 gas stations across the country. The average price of diesel fell 1.8 cents to $2.98 per gallon. “With oil prices sagging lately, the door has been opened for a notable decline in U.S. gasoline prices, and that’s exactly what has happened, with more declines likely coming ahead of us before the fun is over,” said Patrick De Haan, head of petroleum analysis for GasBuddy. “The Midwest has been the largest beneficiary of seasonal effects thus far with prices in several areas there declining upwards of 10-15 cents per gallon. The rest of the country will follow lower for the time being as demand for gasoline remains abysmal and the fuel being produced today will have to eventually be purged from the system over the next few months as refiners begin the transition to summer gasoline.”

Natural gas collapsed as warm weather forecasts buried bulls. Andrew Weissman of EBW AnalyticsGroup wrote that, “the past week has seen startling changes in the European and American weather models. Last week’s forecast for an extended period of very-cold weather has now been replaced with expectations of blowtorch warmth, cutting natural gas demand by 100+ Bcf, and sending the NYMEX strip plummeting. This unexpected change, one of the most abrupt ever in the natural gas market, has already sent the February–April contracts spiraling below $2.00/MMBtu, and could lead to even steeper losses over the next 60-90 days. Falling natural gas prices have spurred price-induced coal displacement to 5.5 Bcf/d—2.3 Bcf/d higher than early November levels. Coal-fired units are likely to operate at steeply displaced levels between now and mid-summer.

The AP reports that, “The head of a Chinese government expert team said Monday that human-to-human transmission has been confirmed in an outbreak of a new coronavirus, a development that raises the possibility that it could spread more quickly and widely. Team leader Zhong Nanshan, a respiratory expert, said two people in Guangdong province in southern China caught the virus from family members, state media said. Some medical workers have also tested positive for the virus, the English-language China Daily newspaper reported. The late-night announcement capped a day in which authorities announced a sharp uptick in the number of confirmed cases to more than 200, and China’s leader called on the government to take every possible step to combat the outbreak. “The recent outbreak of novel coronavirus pneumonia in Wuhan and other places must be taken seriously,” President Xi Jinping said in his first public statement on the crisis. “Party committees, governments, and relevant departments at all levels should put people’s lives and health first.”
Thanks,
Phil Flynn

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HOT COMMODITY PODCAST!

In case you missed it! Phil’s guest appearance on the McKeany-Flavell Hot Commodity Podcast last Friday, September 20th talking about current energy market dynamics. LISTEN HERE!