The Phil Flynn Energy Report 

Confidence

Crude oil prices are showing confidence in growing oil demand, partially because OPEC+ is, too. OPEC+ has skipped all the drama and decided to follow through on a gradual increase in production because, despite the hit from another wave of Covid-19 in India, the reopening trade is getting harder for oil traders and OPEC+ to ignore. 

Goldman Sachs isn’t ignoring it and is calling for the "biggest jump in oil demand in history,” projecting a 5.2 million barrel per day (bpd) increase in just the next 6 months, 50% larger than the next-largest increase over that time frame since 2000. They also see the supercycle commodities rallying another 13.5%, with oil hitting $80.00 per barrel with risks to the upside. This, of course, agrees with what I’ve been saying for months and it's good to get support. Even my calls for an oil and commodity supercycle are being embraced by mainstream thought.

OPEC+ isn’t going to change its plans for modest production increases from May to July. Reuters reported the following:

OPEC+, which is responsible for over a third of global production, has cut output by around 8 million barrels per day — or over 8% of global demand — including a 1 million bpd voluntary cut by Saudi Arabia.

Earlier this month, the group agreed to bring 2.1 million bpd back to the market over the May-July period, easing cuts to 5.8 million bpd.

On Monday, OPEC+ kept its forecast for global oil demand growth for this year unchanged, projecting it to rise by 6 million barrels per day (bpd) after the biggest ever fall of 9.5 million bpd last year due to the pandemic.

The group said in a report that despite the more than one billion [Covid-19] vaccine doses that have been administered globally, it was concerned that the most recent surge in new virus cases in India, Brazil and Japan may derail recovering demand for oil.

Oil prices didn’t seem fazed by a reported +4.319 million barrel increase in crude supply. Perhaps it was because the gasoline supply was down by 1.288 million barrels and distillates down by 2.417 million barrels. There was also a release from the Strategic Petroleum Reserve that made the crude build larger than it otherwise would’ve been. The EIA today may give us direction.

The oil market will also look to the Fed for direction. The market wants to get a sense of whether the Fed is worried about inflation. Rising commodity prices are getting harder for the Fed to ignore!

Crude oil traders must wonder whether or not we’re going to switch from being a net petroleum exporter to an importer next year. Biden’s drilling moratorium, as well as his disdain for oil (unless it comes from Iran), is of concern.

Still, the EIA reported that energy exports from the United States exceeded imports by 3.4 quadrillion British thermal units (quads) in 2020, the largest margin on record according to EIA’s Monthly Energy Review. U.S. energy exports totaled 23.4 quads, nearly equaling the record high set in 2019, and energy imports fell 13% to 20.0 quads, the lowest level since 1992. The United States exported more energy than it imported for the second consecutive year. Hey, will that change in 2021?

We’ve warned you to get hedged for this oil rally and it looks like the consolidation period in oil may be ending! Get ready to move.

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