There is so much news. Most of it bullish for the oil and gas markets. It’s hard to keep up but we will give it best efforts. Oil and natural gas prices are soaring and things are getting so dramatic that Goldman Sachs has joined our call for consumers of natural gas to buy protection with out of the money calls. 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 and 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 very supportive data from the American Petroleum Institute (API) that showed 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 as 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. We may even see in the Energy Information Administration petroleum status report, bigger than expected draws and even more so than we saw in the API report. If that is the case, we would expect that oil and products would continue adding onto the rally that we have 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 is the equivalent of 720,217 barrels per day and 48.20% of natural gas production is still shut as well, driving panic buying of natural gas.
Natural gas prices in Europe are surging again this morning and here in the United States we all know that these record-breaking prices of natural gas in Europe is being caused by bad energy policy. The United States looks like they want to repeat the same mistakes Europe has that has brought them to sharply higher heating bills, utility bills and not to mention, gasoline prices.
The International Energy Agency is saying something we’ve been saying for some time that already the lack of investment in traditional fossil fuels projects is impacting global energy supply, especially oil and natural gas. The International Energy Agency, one of the big proponents of a quick switch to green energy and came out in favor of stopping all investment in fossil fuels, is starting to tell the world that the lack of investment already is costing the poor and the middle class a lot of money. What we are seeing here is one of the biggest transfers of wealth from the poor to the rich, green energy companies. They’re going to see billions in government tax dollars.
The Department of Energy said 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-covid levels. We’re also seeing reports of stronger than expected demand in India. China reports that they slowed down refining activity in August and that is a little bit disappointing. It is widely known that China will tap their strategic petroleum reserve for more oil and that is also a concern but we know that will backfire in the long run. China will have to replace those barrels and at the same time, release more oil to the market to try to alleviate a short squeeze and 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 by making them stripped down, now comes an Argus report that their top nuclear negotiator with world powers has to 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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