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The war in Ukraine has exposed the shortsighted and dangerous war on fossil fuels that is backfiring on almost every level. Not has it led to the world being dangerously undersupplied, it has also helped Vladimir Putin try to use his fossil fuel monopoly as a military and political weapon. U.S. exposure to the oil price spike has the Biden administration reaching out to Venezuela and Iran for answers while their war on fossil fuels rages here at home.

Still, oil prices are pulling back as Iran says that nuclear talks are not dead and the International Energy Agency (IEA) that recently said that there was no need to invest in fossil fuels is now calling on producing nations to produce more of them. This is as Russia continues to vow to send oil and gas to unfriendly nations and calls China to ask for military support in their war with Ukraine. All of that and the fact that oil may have hit a level that is moderating demand is causing prices to fall back.

There are also some hopes for a cease-fire. Reuters is reporting that Ukraine said it would seek to discuss a ceasefire, immediate withdrawal of troops, and security guarantees with Russia on Monday after both sides reported rare progress at the weekend, despite fierce Russian bombardments. Previous rounds of talks have had similar aims but have ended up focused mainly on humanitarian issues and agreed on ceasefires to supply towns and cities under siege by Russian forces have frequently failed. “Negotiations. 4th round. On peace, ceasefire, immediate withdrawal of troops & security guarantees. Hard discussion,” Ukrainian negotiator Mykhailo Podolyak said online.

As many are pointing out, the situation with distillate inventories is dangerously low. Javier Blass at Bloomberg says that “Diesel is the workhorse of the global economy. More than the cost of crude oil, skyrocketing diesel prices (already at an all-time high) should be the main worry of central banks.” John Kemp at Reuters said the shortage of diesel is the most acute since the 1970s.
Bottom line – while charts look like they are in corrective mode, I would suggest using this as another opportunity to hedge! If we avoid a recession, we could see yet another price spike before this thing is all over.

The FT reports, “The Biden administration saw the Ukraine crisis as an opportunity to re-engage with Nicolás Maduro’s authoritarian regime in Venezuela, hoping to secure alternative oil supplies and prise away a key Moscow ally. But after news leaked of a secret mission to Caracas by three top White House officials, sparking a furious political backlash, the administration backtracked. The FT says that “The White House this month sent three top officials to talk to Maduro, even though the US does not recognize him as president and has indicted him as a drug trafficker with a $15mn price on his head. The US government acknowledged last week that one aim was “certainly” to discuss energy security following Russia’s invasion of Ukraine. The visit — the first by a White House official to Caracas since the 1990s — prompted a fierce backlash at home, not only from Republican hawks like Florida senator Marco Rubio but also Bob Menendez, the Democrat head of the Senate foreign relations committee. Rubio accused President Joe Biden of trying to replace “the oil we buy from one murderous dictator [Russian leader Vladimir Putin] with oil from another murderous dictator [Maduro].”

The FT said that “The official US explanation for the trip changed during the week and by Friday, state department spokesman Ned Price said the delegation had traveled to Caracas with “two priorities in mind”. The first was the release of US prisoners and the second was “championing the democratic aspirations of the Venezuelan people”. He made no mention of oil. Rice denied there was a “quid pro quo” for Maduro releasing two US prisoners shortly after the US delegation left Caracas. “For us, there can be no trade-off,” he said.
On Sunday, Jake Sullivan, the US national security adviser, said any sanctions relief for Venezuela “has to be tied to concrete steps that Maduro and the people around him take”. “The perception is that Maduro wins something with this visit from the US,” said Luis Vicente León, a pollster and political analyst in Caracas. “It makes him appear validated, if only indirectly. The US came to him. They’re not recognizing his legitimacy but they are recognizing his territorial control.” According to the FT.

Natural gas prices are seeing hopes for spring as it pulls back this morning. EBW Analytics says that natural gas prices pushed as high as $5.184/MMBtu last Monday as surging capital inflows into energy commodities lifted oil and natural gas in tandem. A notable bearish weather shift, however, proved sufficient to break the correlation with oil and send natural gas lower. Technical support was held at the 20-day moving average and prompted a rebound to close out the week. While wavering production and record LNG feedgas suggest gains may continue, rapidly warming weather appears likely to set up another test near $4.50/MMBtu.