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Global energy markets are facing the reality that underinvestment in fossil fuels creating bad energy policy has left the world undersupplied. Yesterday, we got some very bullish API data that showed U.S. crude supply fell by 4.28 million barrels even though there was a substantial release from the Strategic Petroleum Reserve. We also have Russian deputy prime minister Alexander Novak warning that the globe is undersupplied by one million barrels a day and suggesting that if the world sanctions Russian hydrocarbons, the global oil and gas markets will collapse. Sort of like the Russian Army. Putin is really talking to Asian partners like those in India and China trying to convince them to keep buying his discounted oil. Yet many are still moving away from the blood-tainted Russian oil. Bloomberg reported that French oil major Total announced further self-sanctioning on Russian crude and refined products, saying it will terminate all long-term contracts with Russia as soon as possible, and not later than the end of 2022. 

The lack of Russian oil and products is making diesel supplies tighter. The API reported that US distillate supply fell by 826,00 barrels and gasoline supply by 626,000 barrels. In the U.S., gasoline demand is staying strong despite the recent price spike.

The reality in Germany about the follies of their green energy transition is making them move back to energy reality. The German Chancellor is vowing that Germany will build their LNG terminals at a much faster pace to end its reliance on Russian gas. 

Joe Biden is also saying that he will take more steps to get us off of Russian oil whatever that means. One way might be more oil production here in the U.S. Yet we hear reports that the Biden administration says it will continue, “planning for responsible oil and gas development on America’s public lands and waters,” following a federal ruling favorable to its climate agenda. But when pressed by The National Desk asking if this meant the Biden administration would resume granting oil and gas leases on public lands, the U.S. Department of the Interior (DOI) said it never indicated that was the case, despite conflicting reports circulating social media. “We appreciate the U.S. Court of Appeals for the Fifth Circuit’s decision to grant a stay of the preliminary injunction related to the use of the social cost of greenhouse gases,” DOI spokesperson, Melissa Schwartz, told TND in a statement. “With this ruling, the Department continues its planning for responsible oil and gas development on America’s public lands and waters,” the statement, which failed to explicitly indicate leasing would resume, added.

In other words, more mixed messages from the most anti-fossil fuel administration in history. Bad energy policy is hurting the economy and hurting the pocketbooks of Americans, yet they still are making it harder for the industry to fix things. 

Oil Price’s Simon Watkins reported that the UAE is looking to expand its production capacity from 4 million bpd today to 5 million bpd ahead before 2030. The investments in production expansion are also aimed at boosting the local economy. In tandem with developing its oil output are efforts to build out the means to transport it, and to ship and store the oil and other commodities of other major players in the market.

Oil is back going parabolic and if the EIA confirms the API data, then we should get a big up move. The biggest downside risks are if the Fed surprises us with an early rate hike or if the Biden administration gives in and gives a free pass to Iranian terrorists. Still, as we have been saying for the last two years, use breaks in oil to hedge for upside risk in the marketplace. The energy crisis that I predicted would happen is now a reality for the globe.

Natural gas is looking solid as cold weather, lackluster production, as well as the prospects for a booming future, give rise to the LNG export market.