Energy Report: Standing Tall

Pump Jack, Oilfield, Oil, Fuel, Industry, Petroleum

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Oil prices stood tall even after a massive 15.2-million-barrel crude oil increase in the US oil supply. The increase was enhanced by a record amount of oil imports into the Gulf Coast and was probably impacted by the holiday and the booking of supply. Thanksgiving week, oil demand was disappointing on the product side but an uptick in refinery runs suggests that refiners are starting to ramp up a bit for winter. Gasoline inventories also saw a jump of 4.2 million barrels last week and are about 5% above the five-year average for this time of year as Thanksgiving day driving was the lowest in over a decade. Distillate fuel inventories increased by 5.2 million and are about 11% above the five-year average for this time of year.

Yet the crude oil market is looking beyond the numbers. The market held key support and is now focusing on vaccine distribution that could lead to a spike in demand that should drive global supply back below normal levels next year. Brent crude could take out $50 a barrel and WTI might not be too far behind. The expectation that a Joe Biden administration will lead to a slew of executive orders on energy and will put more oil workers out of work and bring in an era of higher prices. The one thing we might end up missing about 2020 is low gasoline prices but rest assured with John Kerry as “climate potentate” there will be an energy tax coming on all Americans in one way or another. The poor in the U.S. will be hit the hardest by this obviously. Under Joe Biden, the era of low energy prices will be coming to an end. 

As we have been saying we believe the low for the year was put in weeks ago. Short sellers are frustrated with market action especially after getting that monster crude oil build. Part of the support for oil is coming from China. According to S&P Global, China's state-owned refineries planned to increase crude throughputs in November by an average of one percentage point month on month to 79.8% of capacity, data collected by S&P Global Platts showed.

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