Nomenclature said:
09/13/22
Farmer @ Johnsongrass, TX said:
Bookmark this.
In 2 to 3 weeks Saudi will cut crude production. OPEC+ is 3.4mbd under quota for August. Record for being under quota. Basically, since the beginning of the year Commercials have approximately a 9 million barrel build....while 150 million barrels have been released from the SPR (March to present). There is no "build". Maybe that helps paint the picture a bit better. Without the SPR releases(March to present), WTI should have been and presently be $150+, gasoline at the pump should have been and presently be north of $10/gal......for several months.. November should deliver the racheting price increases. Energy is not going to help those CPI numbers, that's why I noted earlier energy could blow up the CPI progress in the YoY calculation.
But ask yourself, are we really at 8% inflation? Maybe consider this, this Administration (DOE/EIA) published numbers that stated our fuel demand/consumption in June and/or July was less than our COVID Lock-Down when nobody drove to work. Sure it was..
Anything ever come of this?
From 9/13 forward...The Biden Administration added 3 more increases in SPR Releases to the 180 million barrel (largest Release). SPR Releases to date are approx. 220 million barrels. Saudi either missed production quota (a cut) or announced a production cut during the same time period. Those releases were offset by the cuts. The S&D shows a total overall draw, but the draw is minimized by the SPR Releases. Demand is not shrinking or declining. Liberals did their job, kept gas prices low at the pump to get re-elected.
As for the DOE/EIA numbers, they're jacked up, but it appears the Monthly Adjustments will continue until the previous demand numbers get rearranged to show something near normal expectations of demand - show demand was/is increasing from summer forward. EIA tried to show demand decreasing.
Nothing came of the jacked up numbers, but analysts know something was/is "off" because they mention the oddity in articles, but cannot accuse EIA because they do not have a smoking gun for evidence,...yet.
So, nothing happened per-se. An artificial supply (SPR) kept a lid on crude oil price action.
The coming weeks EIA weekly report due out on Thursday should not have SPR Releases ("I think" they are done). It will be this Thursday's report or the next Wednesday's report. I'm not sure if the Biden Administration would stop SPR releases if Congress wasn't mandated to sell barrels from the SPR in 2023. I think Joe would like to drain the SPR a lot more if he could. ......Right now, Joe Biden is trying to buy crude (3 million barrels for Feb delivery to start refilling the SPR at $70 per barrel) and offers were due December 28th and simultaneously, Congress is mandated to sell crude from the SPR this year. This is not a good situation to be in.
Regardless of all the above, I am bullish WTI and Brent. When Saudi meets again, expect another production cut. Note to remember, Russia was 10 to 11 mbpd when things were normal. I don't think they will be close to that number going forward (Dec 2022 thru 2023...and longer) and world crude supply is going to tighten up.