Oil prices and the oil industry are battling back from severe challenges, whether it be the aftermath of Hurricane Ida or macroeconomic fears created by the Evergrande crisis in China.
Macro worries about fallout from a possible default in China, fears that the U.S. might not raise the debt ceiling, and uncertainty about the upcoming Fed meeting caused Monday's meltdown.
Global crude oil demand is exceeding supply and we're also seeing a big drawdown in inventories, especially here in the United States. That's causing the cost of oil to go up, which also raises the cost of gasoline.
In their most recent report, the EIA stated that U.S. commercial crude oil inventories fell by 6.4 million barrels, putting inventories about 7% below the 5-year average for this time of year.
Unless energy and shale producers can dramatically increase production, this global deficit of natural gas could become a major issue this winter.
Bureau of Safety and Environmental Enforcement (BSEE) reports show that 76.88% of oil production is still offline in the Gulf of Mexico, along with 77.25% of natural gas production.
As of now, cumulative true oil production losses are at over 20 million barrels of oil. That number will soon exceed 30 million due to the slow comeback for production.
On Friday, the government said the economy created 235,000 new jobs last month, just 1/3 of Wall Street’s forecast and the smallest gain since January.
This is going to be a long slog that will have an impact on prices, just another reason to be prepared for upside risk in oil, gasoline, and diesel.
This record number will be very important to remember because we know that supply and demand data out of the U.S. will be skewed in the coming weeks due to the devastation we’ve seen in Louisiana.