The Phil Flynn Energy Report
Not Up to the Job
The Wall Street Journal reported that “generals and diplomats warned the president about a pullout [from Afghanistan], but the president told his team the U.S. was simply providing life support for the Kabul government while neglecting more pressing issues.” Apparently the president will listen to his scientists, but not his generals.
The Journal wrote that the “president’s top generals, including Chairman of the Joint Chiefs of Staff Army Gen. Mark Milley, urged Mr. Biden to keep a force of about 2,500 troops, the size he inherited, while seeking a peace agreement between warring Afghan factions, to help maintain stability. Defense Secretary Lloyd Austin, who previously served as a military commander in the region, said a full withdrawal wouldn’t provide any insurance against instability.”
Yet, after things fell apart, Biden pointed blame at Trump, the Afghan president, and the Afghan army, then returned to his vacation.
Former Vice President Mike Pence wrote that “The Biden administration’s disastrous withdrawal from Afghanistan is a foreign-policy humiliation, unlike anything our country has endured since the Iran hostage crisis. It has embarrassed America on the world stage, caused allies to doubt our dependability, and emboldened enemies to test our resolve. Worst of all, it has dishonored the memory of the heroic Americans who helped bring terrorists to justice after 9/11, and all who served in Afghanistan over the past 20 years”
He added the following:
In February 2020, the Trump administration reached an agreement that required the Taliban to end all attacks on U.S. military personnel, to refuse terrorists safe harbor, and to negotiate with Afghan leaders on creating a new government. If these conditions were met, the U.S. would conduct a gradual and orderly withdrawal of military forces. Unanimously endorsed by the United Nations Security Council, the agreement immediately brought to Afghanistan a stability unseen in decades.
In the past 18 months, the U.S. has not suffered a single combat casualty there. By the time we left office, the Afghan government and the Taliban each controlled their respective territories, neither was mounting major offensives, and America had only 2,500 U.S. troops in the country—the smallest military presence since the war began in 2001.
Now, because of hubris and lack of empathy— or extremely poor judgment and leadership— from Biden, Afghanistan has been left in the hands of a former associate of Osama bin Laden. The future for the Afghan people looks grim.
The New York Times reported that “[t]he Taliban faced the first street protests on Wednesday against their takeover of Afghanistan. The public display of dissent in the northeastern city of Jalalabad was met by an overwhelming use of force. Taliban soldiers fired into the crowd and beat protesters and journalists.”
The Biden administration, for their part, is just hoping the Taliban plays nice and doesn’t start killing those who helped the U.S. military.
Biden continues to insist that Iran rejoin the nuclear accord; this is also a huge failure. After reversing the Trump administration’s maximum-pressure campaign that isolated the rogue Iranian regime, they’re now deciding to test the will of the Biden administration by doing exactly what the Biden administration wants them not to do.
Bloomberg News reports the following:
Iran has nearly doubled its enrichment capacity dedicated to purifying uranium close to the levels required for nuclear weapons, signaling it won’t de-escalate its atomic activities before meeting again with world powers.
Inspectors verified on Aug. 15 that Iran introduced a second cascade of nuclear centrifuges to produce uranium enriched to 60% purity at a fuel plant in Natanz, the International Atomic Energy Agency said in reply to questions. The machines spin at supersonic speeds to separate the uranium isotopes needed to induce fission.
At this point, oil prices seem to be immune from the unfolding disaster in Afghanistan and the growing risk from Iran. The U.S. Dollar strengthened alongside reports of downgraded China oil demand expectations from Goldman Sachs, which helped push prices lower. That said, the term structure in the Brent crude oil suggests that demand in China is picking up again. The American Petroleum Institute (API) report showed a supportive look at U.S. petroleum inventories.
Via MarketWatch, API reported the following late Tuesday:
U.S. crude supplies fell by 1.2 million barrels for the week ended Aug. 13, according to sources. The API report also reportedly showed an inventory decline of 1.2 million barrels for gasoline, while distillate supplies edged up by 502,000 barrels. Crude stocks at the Cushing, Okla., storage hub, meanwhile, fell by about 1.7 million barrels for the week, sources said. Inventory data from the Energy Information Administration will be released Wednesday. On average, the EIA is expected to show crude inventories down by 3.1 million barrels, according to a survey of analysts conducted by S&P Global Platts. The survey also calls for a supply decline of 2.3 million barrels for gasoline, while distillate stocks are expected to rise by 700,000 barrels.
Gasoline prices have eased back to $3.18, a national average according to AAA. Still elevated! Maybe Biden should ask OPEC+ to raise production again? Oil looks like it is trying to bottom out, so lightly start buying.
Natural gas has pulled back, but it may be time to get hedged. Andrew Weissman at EBW Analytics reports that "Notwithstanding the steep price decline, the bullish fundamental picture for natural gas remains intact. The storage trajectory is too low for comfort, production growth appears lackluster, and gas-to-coal switching is nearly depleted. Major upside price risks, while far from guaranteed, suggest risk-weighted prices should be far higher than the NYMEX winter strip. Near-term, however, algorithmic traders are in control while an end-of-summer demand cliff awaits at the end of next week.” Further losses are still possible.
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