Crude oil prices are showing a wee bit of green this lovely Saint Patrick’s Day and look like it is on track for its first up week since January! This comes after oil took a hit after a record amount of hedge funds went long before the trade went arseways on us. Yet, the bulls may find a pot of gold at the end of the rainbow after OPEC and non-OPEC leprechauns are talking about extending production cuts past the June expiration. The UPI reported that Russia’s Rosneft is talking about an extension of production cuts as well as the Saudi oil minster! If they stick to their guns we are on track for the first global deficit in over a decade. Sláinte!
The Saudi Energy Minister Khalid al-Falih says that OPEC is on track and he seems to expect better cooperation from OPEC and non-OPEC producers. He is saying, basically, that cuts will continue unless we see a dramatic drop in global inventories. This comes after the Russian oil minster promised better compliance by Russia after a wee reminder from the Saudi’s that could raise output as we cut it. When they reported a higher production number than the secondary sources, it was a message, “Where the tongue slips, it speaks the truth.”
What about some big green energy news on the day where we are all wearin' the green! The U.S. Energy Information Administration reports in its latest "Today in Energy Report” that, “The United States exported more than 1 billion gallons (68,000 barrels per day) of fuel ethanol in 2016, an increase of 26% from export levels in 2015. U.S. imports of ethanol, which are relatively much smaller, decreased by 60% to 36 million gallons in 2016. The United States remained a net exporter of fuel ethanol for the seventh consecutive year, exporting ethanol to 34 different countries, with Asian and South American markets receiving the highest volumes.”
Is gas demand really that bad? Gasoline consumption so far this year is down 1.7% from 2016 according to the Energy Information Administration. But is that a short-term situation or are we seeing the type of drop you normally see in a recession? With rising consumer confidence we expect gas demand to come soaring back like a star in the Irish sky! The longest road out is the shortest road home. Time to start looking at the long side of the RBOB!
The Wall Street Journal is also questioning oil demand predictions asking whether oil demand going forward will be higher than expected: “The International Energy Agency’s closely watched annual estimates of global crude demand have been revised up for the past seven years by an average of 880,000 barrels a day, according to a Wall Street Journal analysis. Investors and analysts believe that the IEA will have also underestimated demand this year, suggesting that more oil is being bought than the market currently believes."