OPEC Secretary General Haitham al-Ghais said on Wednesday that the organization is ready to “intervene for the benefit of oil markets”, Saudi-owned Al-Arabiya TV reports, citing Ghais as saying that OPEC is aware, cautious and monitoring economic developments worldwide. In early October, OPEC+ announced plans to reduce oil production by 2 mb/d in November 2022 from the August 2022 required production level, a move that angered President Joe Biden who lambasted the organization for colluding with Russia to keep oil prices high. If the plan is implemented, Saudi Arabia and Russia should produce 10.5 mb/d in November 2022; the production of the OPEC 10 group members should reach 25.4 mb/d while that of non-OPEC producers should be 16.4 mb/d. This in effect would lead to the production of OPEC+ coming to an average of 41.9 mb/d. Further, OPEC and its non-OPEC allies including Russia agreed to extend their cooperation, which was set to end on 31 December 2022, by another year. After an initial bump, oil prices have cooled since the announcement partly because the impact of the production cut is likely to be limited with many members already struggling to meet quotas and also due to economic uncertainty and China doubling down on its zero-Covid policy both of which are likely to hit demand. OPEC has predicted that China’s oil demand will decline by 60,000 barrels per day this year, after forecasting an increase of 120,000 b/d only a month ago thanks to new lockdowns. OPEC has cut its demand growth view for 2022 by 460,000 bpd to 2.64 million bpd and for 2023 by 360,000 bpd to 2.34 million bpd, citing “the extension of China’s zero-Covid-19 restrictions in some regions, economic challenges in OECD Europe, and inflationary pressures in other key economies.” During the third quarter, NYMEX West Texas Intermediate (“WTI”) crude oil averaged $91.38 per Bbl, and NYMEX natural gas at Henry Hub averaged $7.95 per million cubic feet (“Mcf”).
NN BlackMask Blog: They Sure are Spinning Oil at $70
Metal markets are smiling as China begins to show signs that it may ease up on its controversial zero-Covid restrictions.
News of the rumors sent metal markets soaring.
Except for aluminum, almost all industrial metal markets seem to endorse China’s easing of COVID restrictions.
It may be winter, but it feels like springtime for many in the metal industry and on metal prices in general. After years, China plans to ease up just a wee bit on its COVID-19 restrictions. This includes a reduction in the mandatory quarantine period, which has caused myriad problems for the country’s economy. As one of the world’s largest producers and consumers of metals and minerals, the country’s decision feels like hope to many weary buyers and sellers. Indeed, the decision provided a big boost to the long-despondent metal world. Multiple industrial metals prices jumped significantly on Friday following the announcement. Of course, this was driven not only by the easing of some restrictions but also by renewed expectations that China would soon abandon its zero-COVID policy entirely. The overall market reaction was immediate. Three-month copper on the London Metal Exchange (LME) surged up 3.4%, the highest since June 22, 2022. Meanwhile, the most-traded December copper contract on the Shanghai Futures Exchange climbed 1.5% to US $9515.30 (67,630 yuan) a ton. This represented its highest levels in about five months. Iron ore also went up last Friday. Indeed, the most-traded January iron ore on China’s Dalian Commodity Exchange, DCIOcv1, ended daytime trade 5% higher at US $99.86 (708.50 yuan) a ton. Price benchmarks for steel products and other steel-making inputs also increased gains. This is to be expected, as China remains the world’s top steel producer, So far, the good mood continues to carry over to this week. London copper prices edged higher on Monday, and currently hover near their highest point in five months. Singapore iron ore futures were also up, climbing 5% to US $95.85/t. Except for aluminum, almost all industrial metal markets seem to endorse China’s easing of COVID restrictions. Indeed, China’s pandemic restrictions were only part of the problem, with Russia’s invasion of Ukraine only exacerbated global trade issues. Many theories exist as to why China initiated this long-overdue about-face. Some suspect that China’s decision to minimize the impact. of COVID restrictions had to do with the LME not banning Russian metal. With metal markets about to turn a dangerous corner, something had to be done. No doubt, China’s zero-Covid lockdowns have drastically impacted its manufacturing sector and the demand for industrial metals. But that is only half the story. The other half is the loss of demand in China’s property sector. This means this short bull run in metal prices can only enjoy mid-term sustainability if the consumer market picks up. To that point, China’s property market continued its slump from October. Imports of unwrought copper and copper products fell 1.5% from a year ago. For housing steel, the drop in demand was nearly 30%. Fortunately, the Chinese Government recently released a 16-point rescue package for the country’s housing sector. While this is great, it may not be enough to pull the markets out of the doldrums. On top of that, the COVID-19 ease-off, too, seems a bit touch and go for now, especially given that the country continues to report high numbers of cases nearly every single day. Ultimately, it’s important to remember that consumer demand is one of the many things that sway investor sentiment. For a market that has been in a downward spiral for the last 13 months, keeping the current positivity going may become a significant challenge. NN: So which spin of the correct one. China COVID restriction will throttle energy demand OR China lifting COVID restriction will increase metal demand. I am getting that funny smell of bullshit lots of bullshit being spread in the oil market.
European refiners now seem to have more crude oil than they need—with the early panic about Russia’s dwindling oil exports—and the world’s subsequent oil shortage—proving to be overblown. Crude oil traders have pointed to Europe’s ability to source crude oil from Latin America, the Middle East, and the United States as the main cause for European refiners breathing a sigh of relief. Asia, too, has scooped up less crude oil than analysts were predicting, thanks to China’s neverending battle to obtain the elusive zero-covid goal. Europe’s imports of Latin American crude have averaged 313,000 bpd so far this year, up from 132,000 Refinitiv Eikon data shows. In July, the average was well above that, at 600,000 bpd. From the United States, Europe has taken 1.1 million bpd on average this year, compared with just 800,000 bpd last year. Europe’s Iraqi oil imports are 20% higher from July-November compared to the same period last year. The supply overages are weighing on prices. Brent prices have slumped nearly $9 per barrel since this time last week. One European crude oil trader told Reuters that European refiners “seem to have overbought in November and December, probably because of fears around Urals.” In addition to these fears causing panic purchases, weeks-long strikes at French refineries and a rash of refinery maintenance also curbed the call for crude oil in Europe as runs slowed. Traders and refiners increased their purchases over this summer, anticipating shortages stemming from Europe’s ban on imports of Russian crude oil. That ban is set to go into effect on December 5. Until then, Europe will likely have no issues with obtaining enough crude oil. Post-December 5, however, could be a different story. NN: Do not forget three key events. Dec 5 sanctions kick in on Russia exports. They can use the rules to prevent Russia oil exporters to be able to charter ships. And insurance on Russia oil cargoes will impossible to obtain. Next up is the upcoming OPEC meting and i believe they will cut production… and past experience shows OPEC production cuts really work. And next is the reality that China is loosening COVID restrictions. Look i am not going to blow blue sky up your ass. Long oil is a gutsy DANGEROUS gamble. Its beyond trading. In fact some will say its lunacy. But we do crazy! Of course refieneries bough ahead in anticipation. Thats the buyers job description. But with every passing day it gets colder and refinery inventories drop further. Its a temporary phenonoum. Lower prices like we have cut production. And OPEC, a cold winter and sanctions cut supplies. Its a horse race for sure.
WTI crude fell more than 4% on Thursday afternoon.
Low liquidity in paper markets, easing geopolitical tensions and China’s ongoing struggle with COVID-19 weighed on crude prices.
Rounding out the list of downward pressures is the rising dollar, with the dollar index DXY up 0.75%
Oil prices plummeted on Thursday on a series of bearish market forces, led by thin liquidity and easing geopolitical tensions between Russia and the West when it became clear that the missile striking Poland earlier in the week did not come from Russia. Paper markets are a major market force, which appear to be dumping with low volume and heightened margin requirements. There is a distinct reduction in open interest in the November oil contract—which is close to expiry—that is causing increased market volatility.
This is despite the healthy demand for physical crude oil.
This thin paper liquidity combined forces with easing geopolitical tensions after it was reported that the missile likely came from Ukraine, not Russia. It was originally thought that the missile likely came from Russia, which had sent oil prices higher on the news. But the spike was temporary, as has been the case as of late. Further weighing on prices were concerns that crude oil demand could fall on renewed fears that China’s struggle to get its Covid cases under control within its zero-Covid policy could have a deleterious—and chronic—effect on demand in the world’s largest crude oil importer. China reported 23,276 new covid cases on Wednesday, its National Health Commission said on Thursday, compared to 20,199 a day earlier. In addition to easing geopolitical tensions and China’s never ending COVID saga, JP Morgan’s forecast this week that the United States will enter a recession next year thanks to the Fed’s continued rate hikes, dampening the outlook for oil demand. Rounding out the list of downward pressures is the rising dollar, with the dollar index DXY up 0.75%. The bearish news has been more than enough to offset the low inventories in the United States, which saw a more than 5 million barrel draw in U.S. commercial crude oil inventories, along with a more than 4 million barrel draw in U.S. SPR inventories. NN: The tale of 2 markets. Their is the paper market we trade and the deliverable market. Their are wide price disparities. Mega Fund Commodity (manipulates.. some of their names begin with a S) traders are driving paper markets lower. We have seen this many times and the secret is to use their manipulations against them. And that my friend goes against human nature. Trading is not a natural event. Most peoples guts, experiences and instincts will not help them. I implore you to not make the basic mistake. Your enemy the funds do not have endless money. But they want you to believe they do. In fact with the days of zero interest rates over and FED tightening the good old days are gone.They cannot hold these prices down indefinitely. Its really a different equation. In a word RUSSIA! Embargoes and the war means we have a world wide energy crises.. Wind farms and harvesting solar won’t cut it. That is a proven fact! AND under investment in fossil fuel projects means their are no replacement well coming on stream. Oil fields get old and become depleted. Reality is despite the COVID China hysteria world energy production will drop. And energy demand will stay pretty much the same in the coming global recession… Production will fall far faster then demand. My next story is about China opening up not shutting down. Its a great example of how this COVID shut down will cut China energy demand is BOGUS!
Hunt confirmed the construction of the long-awaited Sizewell C nuclear power plant in Suffolk during his Autumn Statement on Thursday afternoon. Speaking in the Commons, Mr Hunt said the new plant would create 10,000 highly skilled jobs as well as providing reliable, low carbon energy to six million homes and will generate electricity for 60 years. The plant will also help protect the UK from international gas prices and aid the country’s pursuit to be energy secure, Mr Hunt added. He said: “There is only one way to stop ourselves being at the mercy of international gas prices: energy independence combined with energy efficiency. “Britain is a global leader in renewable energy but we need to go further, with a major acceleration of home-grown technologies like offshore wind, carbon capture and storage, and, above all, nuclear.”
Government will press ahead with plans for new nuclear power station Sizewell C in the south east of England
Chancellor Jeremy Hunt says it’s “our biggest step in our journey to energy independence”https://t.co/TCY20i8XDd pic.twitter.com/Kl1BALWmPy
There had been suggestions that the plant, which is estimated to cost between £20-30billion, may be axed as part of the Government’s pursuit to balance the books. But the Chancellor said the Government would invest £700 million adding that it was the first state backing for a nuclear project in over 30 years. Despite his comments, Sue Ferns, senior deputy general secretary of Prospect union called for the Government to provide investors with assurances in order for them to commit after years of delay over the nuclear plant. “The Government’s reiteration of its commitment to Sizewell C is welcome but merely restating previous announcements is not enough,” she said. “This is not something that can wait. Potential investors are seeking assurances now and without their commitment, dependent on a firm decision from the Government, the project risks being holed below the waterline. “Enough warm words – get on with what is necessary.” Nuclear Industry Association chief executive Tom Greatrex, said: “This is a huge moment for Sizewell C, for UK energy security and for the future of nuclear in Britain. “Sizewell C will be one of the UK’s most important green infrastructure projects ever, and critical to the Government’s commitment to strengthen energy independence, cut gas use and bring down bills. “The UK now needs to urgently get on with building new nuclear plants alongside renewables to meet the targets set out in the Energy Security Strategy, and we look forward to Sizewell C contracts being signed in the next few weeks.
NB: Unhook my dick… what they forgot to tell you is the fact that this URGENT nuclear plant costing 20 to 30 billion pounds is expected to commence before 2024, with construction taking between nine and twelve years“
They say this announcement also paves the way for the development of a pipeline of new nuclear projects, both large and small modular reactors, to deliver clean, reliable power for the British people.” NN: I am sure glad the Brits solved the energy crises with “green Nukes” in the next 10 years….. Just in time!
OPEC is “back in the driver’s seat” as the world’s most powerful swing producer, Hess Corp CEO John Hess said on Thursday at a Miami conference. According to Hess, U.S. crude oil production will average 13 million bpd over the next few years, where it will plateau, as investors pressure U.S. oil companies to focus on returning money to shareholders instead of investing in aggressive growth strategies. It’s what we’ve been hearing for most of the year; U.S. oil companies are skittish about spending what has been a significant influx of cash this year on ramping up production—not only in an uncertain regulatory environment but in an environment where shareholders continue to demand prudence—and cash—not more investments, which was tolerated in years gone by. U.S. crude oil production averaged 11.975 million bpd in August this year–the latest data available from the Energy Information Administration. This is up from 11.277 million bpd last August but down from 2019, before the pandemic had cut deeply into crude production. While U.S. production has ticked up from the 10.457 million bpd in October 2020—one of the lowest points for the U.S. oil industry in years—it is still well below the 13.0 million bpd peak in November 2019. But even more importantly, this year’s failure of the U.S. oil industry to ramp up production in response to dwindling domestic inventories has been a testament to its ability to ramp up at all—stripping it of its swing producer title. In its absence, OPEC has assumed this role by default. “Shale was thought of as a swing producer, the Saudis and the OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer,” Hess said, pointing out that OPEC lacks some spare capacity to boost production easily. “We are in the resource business and if you are going to grow future cash flow, you have to grow your resource,” Hess said. NN: Its very simple for me. Their is not enough oil to meet demand… So i am buying the shit out of it hoping i can get some at $70 a barrelll….. Now don’t shit yourself. i do not believe they can get their. See they can shit you all they want but the greeneeewennies with their catastrophic climate change unproven theories have hijacked many ha ha ha leaders. In their hysteria they are preventing the investment and infrastructure to bring new oil to market. Unfortunately oil wells become depleted. So the world new a constant supply of new oil… Which it has. But if you do not allow the capital formation, infrastructure and permits you will soon not have enough supply. And that is all well and good if you have VIABLE alternatives in place. Which we do not. Ask the Europeans what happens when you rely on fantasy renewables..
Oil prices declined on Wednesday and were still lower early on Thursday morning as NATO made clear that the missile that fell in a Polish village did not come from Russia. West Texas Intermediate settled at its lowest level in about three weeks on Wednesday, MarketWatch reported. The military organization and the Polish authorities said that the missile was likely fired by the Ukrainian forces in response to Russian missile attacks. Oil prices jumped on the initial reports of the incident, in which two people lost their lives, as initial reactions from politicians suggested a further escalation between the West and Russia. Later, as the facts began to emerge, the comments changed and the tension was effectively defused, pushing prices lower. “Crude oil fell after NATO cleared Russia’s missile attack on Poland, while demand concerns (are) back to trader’s focus amid ongoing China’s Covid curbs and gloomy global economic outlooks,” CMC Markets analyst Tina Teng told Reuters. The U.S. reaction to reports of missiles falling on Poland drew some rare praise from Russia, with Kremlin spokesman Dmitry Peskov welcoming the “measured” and “professional” response. A further headwind for oil prices is the beginning flu season, which could complicate the pandemic situation in China, according to some observers. “With Covid cases in China continuing to rise, especially as we move towards flu season, traders are left with little option to recalibrate positions reflecting the possibility of more lockdowns in heavily populated centers that hurt oil demand exponentially more than other areas of the economy,” said Stephen Innes from SPI Asset Management. The headwinds appeared strong enough to offset a sizeable decline in U.S. crude oil inventories, at some 5.4 million barrels for the week ending November 11. Initially, after the EIA reported the figures yesterday, prices inched up only to decline later and close lower than they opened. There is still upside potential going forward, however. For starters, there is the upcoming EU embargo on Russian crude, which also features sanctions on third-party buyers that do not comply with it. There is also the diesel shortage problem, particularly pronounced in Europe and parts of the U.S., which is seen as contributing to higher oil prices. “With the severe shortage of heating oil here on the east coast and the situation continuing to evolve in Poland/Ukraine, we feel energy markets will be driven by headlines with volatility to remain quite elevated,” Tariq Zahir, managing partner at Tyche Capital Advisors, told MarketWatch. “We do feel the risk is to the upside in the short to medium term.”
US sanctions 13 firms with links to Iranian oil sector
United States Treasury Department’s Office of Foreign Assets Control (OFAC) revealed on Thursday it will sanction 13 companies based in China and the United Arab Emirates over their alleged links to the Iranian oil industry. The group was accused of helping already-sanctioned Iranian petroleum firms sell “hundreds of millions of dollars’ worth of Iranian petrochemicals and petroleum products to buyers in East Asia,” thus allegedly enabling Tehran to evade Washington’s sanctions regime. Six sanctioned companies are from the UAE, two are based in mainland China, and five are registered in Hong Kong.
The Federal Reserve may have to raise its benchmark interest rate much higher than it has previously projected to get inflation under control, James Bullard, president of the Federal Reserve Bank of St. Louis, said Thursday. Bullard’s comments raised the prospect that the Fed’s rate hikes will make borrowing by consumers and businesses even costlier and further heighten the risk of recession. Wall Street traders registered their concern by sending stock market futures further into the red early Thursday. The Dow Jones Industrial Average fell about 180 points, or 0.5%, in morning trading. Bullard’s remarks followed speeches by other Fed officials in recent days that suggested they see only limited progress, at most, in their use of steadily higher rates to fight inflation. Bullard’s views have added significance because he is a voting member of the Fed’s rate-setting committee this year.
The Fed’s key short-term interest rate “has not yet reached a level that could be justified as sufficiently restrictive,” Bullard said. “To attain a sufficiently restrictive level, the policy rate will need to be increased further.”
The Fed is seeking to raise borrowing rates to a level that restrains economic growth and hiring in order to cool inflation. The central bank has rapidly raised its benchmark rate by an aggressive three-quarters of a point at each of its last four meetings — the fastest series of hikes since the early 1980s. The cumulative effect has been to make many consumer and business loans costlier and to raise the risk of a recession. Those increases have boosted the Fed’s short-term rate to a range of 3.75% to 4%, up from nearly zero as recently as last March, to the highest level in nearly 15 years.
Bullard suggested that the rate may have to rise to a level between 5% and 7% in order to quash inflation, which is near a four-decade high. He added, though, that that level could decline if inflation were to cool in the coming months.
Loretta Mester, president of the Cleveland Fed, echoed some of Bullard’s remarks in her own speech Thursday, when she said the Fed is “just beginning to move into restrictive territory.” That suggests Mester, one of the more hawkish policymakers, also expects rates will have to move much higher.
Homebuyers have faced a dilemma during the pandemic: Swallow rapid price increases and forgo typical steps like house inspections, or risk getting left out of the real estate market. Those dynamics have caused some observers to question whether the U.S. is repeating the housing bubble of the early 2000s, which led to a painful housing crash in 2006 and the Great Recession the following year.
The answer, warns the Federal Reserve Bank of Dallas, is that the property market is showing “signs of a brewing U.S. housing bubble.”
That may be unsettling to millions of potential homebuyers who are coping with myriad financial pressure points. For one, mortgage rates are swiftly rising, reaching an average of 4.67% for a fixed 30-year loan for the week ended March 31 — the highest since 2018, according to Freddie Mac. And the national median listing price for a home has jumped to a record $405,000, Realtor.com said on March 31. Home buying jumped during the pandemic due to a confluence of trends. For starters, millennials now represent the largest U.S. generation and have moved into their prime home buying years. And the pandemic forced millions of people to work from home, prompting some to move out of cities or look for bigger dwellings to cope with the reality of remote work. The typical listing price for a home has jumped almost 27% in the past two years, Realtor.com said. To be sure, a rapid rise in home values doesn’t necessarily signal a bubble, the economists at the Dallas Fed noted. “But real house prices can diverge from market fundamentals when there is widespread belief that today’s robust price increases will continue,” they noted. “If many buyers share this belief, purchases arising from a ‘fear of missing out’ can drive up prices and heighten expectations of strong house-price gains.” Meanwhile, more home buyers are opting for adjustable-rate mortgages, or ARMs, since these loans offer a lower initial rate for a number of years but then adjust annually at higher rates. Demand for ARMs has jumped 26% from a year earlier, according to real estate company Inman. The current rate for a 5/1 ARM (with the initial rate set for five years) is 3.5%. There are signs that rising rates are impacting the real estate market, with Redfin predicting that home-price growth will slow. More sellers are reducing their asking prices after listing, the real-estate company said on March 31. To examine whether the current dynamics could reflect a bubble, the Dallas Fed economists dug into three different market metrics. Their conclusion: There are signs of a “market tipping point. First, the economists looked at a statistical model that tracks “exuberance,” or when prices increase at an exponential rate that can’t be justified by economic fundamentals. When their exuberance measure reaches a 95% threshold, that signals 95% confidence that the market is experiencing “abnormal explosive behavior,” they noted. The current exuberance measure: 115%. Next, the economists looked at another measure of valuation: Comparing home prices against the sum of discounted future rents. It’s a similar concept to how investors determine the value of a stock by looking at discounted future dividends, the economists noted.
That, too, is showing exuberance that is “comparable to the run-up of the last housing boom,” they said.
Third, the analysts examined the ratio of home prices to disposable income, another measure of housing affordability. This hasn’t risen to the level of exuberance, but the economists noted that household disposable income was buoyed during the pandemic by stimulus checks as well as a decrease in household spending due to lockdowns — transitory factors, in other words. Danielle Hale, chief economist at Realtor.com, said that while the current rate of home price growth was unsustainable, it’s hard to predict when the price increases will slow. “Double-digit price increases and rent increases can’t go on forever,” she said. Hale said that rising mortgage rates, which make housing less affordable, should slow the pace of price increases somewhat. “When mortgage rates were falling, that helped cushion high housing costs, because people had smaller monthly payments. Now rates are moving in the opposite direction and it’s increasing the monthly costs. That means prices will not be able to sustain the double-digit pace of growth,” she said. Their is something going on that the economists have flagged as worrisome: “A fear-of-missing-out wave of exuberance involving new investors and more aggressive speculation among existing investors.” A fallout from a housing correction from the current real estate boom wouldn’t be similar to the 2007-2009 financial crisis, they said. But for some recent home owners, a correction could still prove painful. NN: Spin it anyway they like but a real estate crash is coming.
US housing starts plunge 4.2% in October
Housing starts in the United States dropped 4.2% in October compared to the revised September rate, according to the report by the Census Bureau on Thursday. Privately-owned housing starts stood at 1,425,000, down from 1,488,000 in September and decreasing much more sharply than the projected 2%.On a yearly basis, housing starts were down 8.8%. Building permits fell by 2.4% to 1,526,000 in October month-on-month, a 10.1% decrease compared to October 2021. Housing completions declined 6.4% monthly but rose by 6.6% annually, coming in at 1,339,000. NN: the builders have the best information of everyone. If they are pulling in their horns they must see the coming wipeout.
OPEC Secretary General Haitham al-Ghais said on Wednesday that the organization is ready to “intervene for the benefit of oil markets”, Saudi-owned Al-Arabiya TV reports, citing Ghais as saying that OPEC is aware, cautious and monitoring economic developments worldwide. In early October, OPEC+ announced plans to reduce oil production by 2 mb/d in November 2022 from the August 2022 required production level, a move that angered President Joe Biden who lambasted the organization for colluding with Russia to keep oil prices high. If the plan is implemented, Saudi Arabia and Russia should produce 10.5 mb/d in November 2022; the production of the OPEC 10 group members should reach 25.4 mb/d while that of non-OPEC producers should be 16.4 mb/d. This in effect would lead to the production of OPEC+ coming to an average of 41.9 mb/d. Further, OPEC and its non-OPEC allies including Russia agreed to extend their cooperation, which was set to end on 31 December 2022, by another year. After an initial bump, oil prices have cooled since the announcement partly because the impact of the production cut is likely to be limited with many members already struggling to meet quotas and also due to economic uncertainty and China doubling down on its zero-Covid policy both of which are likely to hit demand. OPEC has predicted that China’s oil demand will decline by 60,000 barrels per day this year, after forecasting an increase of 120,000 b/d only a month ago thanks to new lockdowns.OPEC has cut its demand growth view for 2022 by 460,000 bpd to 2.64 million bpd and for 2023 by 360,000 bpd to 2.34 million bpd, citing “the extension of China’s zero-Covid-19 restrictions in some regions, economic challenges in OECD Europe, and inflationary pressures in other key economies.”
U.S. Diesel Inventories Hit Historic Lows At The Worst Possible Time
U.S. distillate stocks, which include diesel and heating oil, have slumped to their lowest level for this time of the year since 1951, just as the heating season starts and the EU embargo on Russian oil product imports kicks in in February. Despite a small build in America’s distillate inventories last week, the levels are still at their lowest level since 1951, according to Financial Times estimates. The historically low stocks have pushed diesel prices much higher than the smaller rises in gasoline and crude oil this year. Since diesel is the primary fuel of the economy and long-haul transportation, the high diesel prices continue to fuel inflation. In the week ending November 11, distillate fuel inventories increased by 1.1 million barrels and are about 15% below the five-year average for this time of year, the EIA said in its weekly inventory report on Wednesday. At 107.4 million barrels, those stocks are the lowest ever seen for this season of the year. “The bulk of the increase in distillate stocks was on the US East Coast. And while this is helpful, stocks in the region are still at their lowest levels on record for this time of year,” ING strategists said on Thursday, commenting on the EIA inventory data. Very low diesel stockpiles and lower refining capacity since the pandemic have driven diesel prices in the United States higher to the point of reaching a record-high premium over gasoline and crude oil. Going forward, the supply of diesel in the U.S. and globally is set to tighten even further with the EU embargoes on imports of Russian crude and products, starting in December and February, respectively. “The competition for non-Russian diesel barrels will be fierce, with EU countries having to bid cargoes from the US, Middle East and India away from their traditional buyers,” International Energy Agency (IEA) said in its monthly report earlier this week. “Increased refinery capacity will eventually help ease diesel tensions. However, until then, if prices go too high, further demand destruction may be inevitable for the market imbalances to clear,” said the agency, which sees stubbornly high diesel prices fueling inflation as well as slowing economies leading to a slight decline in global diesel demand in 2023.
