Energy Report: Iranian Headlines And Reality

Oil prices got hit hard on a Bloomberg headline that the U.S. lifted sanctions on Iranian oil. That caused a sharp selloff. Yet Bloomberg later offered a correction saying that the U.S. had lifted sanctions on Iranian individuals. That has nothing do to with the Iranian nuclear talks that seem to be going nowhere. Neither is their oil. OK, at least not today.

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Tanker Trackers reports that Iran's Crude Oil & Gas Condensate exports are now trending back down again due to a logistical constraint caused by a lack of spare VLCC supertankers. NITC's fleet is currently storing 70 million barrels of gas condensate due to insufficient demand from China.

In the meantime, the oil price comeback is solid as the global inflation trade is heating up and demand is coming back faster than anticipated. The International Energy Agency says that global oil demand is set to return to pre-pandemic levels by the end of 2022, rising 5.4 mb/d in 2021 and a further 3.1 mb/d next year. The OECD accounts for 1.3 mb/d of 2022 growth while non-OECD countries contribute 1.8 mb/d. Jet and kerosene demand will see the largest increase (+1.5 mb/d y-o-y), followed by gasoline (+660 kb/d y-o-y) and Gasoil/diesel (+520 kb/d y-o-y).

World oil supply is expected to grow at a faster rate in 2022, with the U.S. driving gains of 1.6 mb/d from producers outside the OPEC+ alliance. That leaves room for OPEC+ to boost crude oil production by 1.4 mb/d above its July 2021-March 2022 target to meet demand growth. In 2021, oil output from non-OPEC+ is set to rise 710 kb/d, while total oil supply from OPEC+ could increase by 800 kb/d if the bloc sticks with its existing policy.

With the normally pessimistic IEA saying demand is coming back the trend will continue to move higher. We see a supply squeeze building. More Demand; less supply! Higher Prices! That is why for months I have been telling you to get hedged if you have upside risk  

 Natural gas is getting a boost from hot temperatures. U.S. Natural Gas Exports are Europe’s best hope to fight climate change and I think that there are starting to realize that? I wonder if the Biden Administration understands the value of natural gas.

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