Energy Report: OPEC Plus Unleashed


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OPEC Plus is having their meeting today and based on what we are hearing, they seem to be leaning towards a lower-than-expected production cut. It seems higher prices for oil suits the group well as it thinks that with a lot of global market stimulus, they can allow oil prices to move higher without damage to the economy.

OPEC Plus will not see opposition from the Biden administration whose quite clearly in favor of higher oil and gas prices. Yet their desire to make oil and gas more unaffordable may come with a downside for the US economy as the administration now has to face the threat of rising inflation and interest rates in a struggling Covid 19 economy. Oil supplies have swung from the biggest oil glut in history to potentially the tightest market we have seen since the beginning of the millennium and could get out of control and sink the Biden economy. The Biden administration is willing to sacrifice jobs and the economy to forward their progressive agenda but if they don’t change, it increases the odds that we are headed into a recession.

The OPEC+ Joint Ministerial Monitoring Committee (JMMC) popped oil prices after they failed to meet without any recommendations on oil production. That means that instead of raising output there is a possibility that OPEC will stand pat and just roll over its current cuts which more than likely would send oil prices higher. The consensus is that the group will raise output by 500k. At this point, it is even unclear as to whether Saudi Arabia will reduce their voluntary Saudi Arabia 1 million barrel a day production cut. So stay tuned. Libya though, as a side note, has seen its production increase to 1.3 million barrels a day.

Oil prices also had to price in the fallout from the Texas energy crisis. Apologists for wind and solar energy continue to try to point fingers at oil and gas for the problems. Yet for wind and solar, they are the power source that is not sustainable when weather conditions are adverse.  The impact of the storm was seen when we saw the biggest gasoline supply drawdown since the 1990s and on the flip side the biggest crude oil supply increase ever. The EIA reported that U.S. commercial crude oil inventories increased by 21.6 million barrels from the previous week. At 484.6 million barrels, U.S. crude oil inventories are about 3% above the five-year average for this time of year. Total motor gasoline inventories decreased by 13.6 million barrels last week and are about 3% below the five-year average for this time of year. Finished gasoline and blending components inventories both decreased last week. Distillate fuel inventories decreased by 9.7 million barrels last week and are about 2% below the five-year average for this time of year.

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