Getting Ready To Snap
Natural gas (NYMEX:NGU14) demand and Putin snap back as low gas prices spark a demand rebound while Putin declares sanctions on food. The battle between geo-politics and supply and demand continue to move crude oil (NYMEX:CLU14) and other commodity markets. While oil has seemed to forget about Iraq as oil exports continue, ISIS continues to slaughter Christians and Libyan oil exports continue to disappoint. Yet oil is subdued as oil rig counts are rising around the world bringing relative calm in a scary world. Baker Hughes reports worldwide rig counts are up 246 from a year ago and 110 of those are from the United States. The United States and their high yielding oil is the buffer that is shielding the world from an oil price shock and economic sanctions may do enough to destroy demand that could lead to a breakdown in the oil market.
Yet gasoline (NYMEX:RBU14) is trying to put in a short term bottom as the Energy Information Administration reported that the drop in gasoline prices sparked a jump in demand. The EIA said that gasoline stockpiles fell by 4.39 million barrels and demand over four weeks reached the highest since June 13. Distillate supplies also fell for the first time in 10 weeks.
Yet while gas demand popped we have said for some-time that the era of high gas prices and consumption growth was coming to an end and a new report from Navigant Research agrees. In a report titled "Transportation Forecast: Global Fuel Consumption," Navigant Research as reported by Auto-Green concludes that gasoline consumption will begin to decline after 2021, and will decrease by four percent worldwide between 2014 and 2035.
While it might not be time to break out the champagne yet, the forecast is promising. And it's not just a fluke or natural, cyclical event, either. This is the result of conscious effort by actual humans who are concerned about the effect gasoline use has on the Earth and its inhabitants. "The anticipated effects of climate change are driving international cooperation on mitigation efforts," says Navigant Research analyst Scot Shepard, "including reducing oil consumption in the transportation sector. Markets for both vehicles and fuels have gradually begun to respond to these efforts, and alternative fuels--including electricity, natural gas, and biodiesel--are beginning to have an impact on global oil demand."
Okay, maybe just a little champagne. Navigant credits electric vehicles to a small extent for the eventual decline in gas use, as well as development of biofuels and the like. The group says, though, that the main factors are improvements in cars and the internal combustion engines they use, which lead to better fuel economy.
Russia's Food sanctions
The AP reports that clergymen in northwestern Iraq on Thursday said militants with the Islamic State of Iraq and al-Sham, or ISIS, have overrun a cluster of Christian villages alongside the country's semi-autonomous Kurdish region, sending civilians and Kurdish fighters fleeing from the area. Bishop Joseph Tomas says the village of Qaraqosh and at least four other predominantly Christian hamlets were in the hands of the Islamic State. Tomas says Kurdish peshmerga units, which had protected the area, fled along with civilians. Other priests confirmed the information. The Islamic State has already seized large chunks of northern and western Iraq, plunging the country into its worst crisis since the 2011 withdrawal of U.S. troops. The death toll from a series of bombings in Baghdad on Wednesday rose to 61 people, after several of the wounded died.
As Russia bans imports of a wide range of food from countries that imposed sanctions against them commodity markets are ready to move. We saw a knee jerk reaction in the wheat market and meat traders have to be on guard. Russia plans a total ban on deliveries of beef, pork, fruit, vegetables, poultry, fish, cheese, milk and dairy product. Stay Tuned!