The Biden administration is probably having second thoughts about its energy policy as it becomes clear that a breakdown in talks between Saudi Arabia and the UAE overproduction increase, could leave the oil market undersupplied and the U.S. economy at risk. The Biden administration is calling for OPEC to raise production after the UAE and Saudi Arabia failed to settle their differences about the baseline for a production increase, driving oil to an eight-year high.

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That might seem a bit hypocritical because the Biden administration put drilling moratoriums on federal land and more restrictions on U.S. drilling, allowing OPEC plus to have more sway over global oil prices. Calling for more oil production seems to be at odds with the administration's war against climate change. The Biden administration's energy policy has many companies looking to become more carbon-neutral leading to underinvestment in U.S. oil and gas, thereby seceding our energy independence to OPEC Plus. Instead of setting the global energy agenda, we're now back to begging OPEC plus to raise production. The bending of OPEC for more oil goes back to the days before the U.S. shale revolution where the U.S. shale producers kept global oil prices in check. Now that the Biden administration has restrained shale producers, we're seeing the impact it's going to have on oil prices and the economy.

This looming oil crisis is not a surprise to readers of The Energy Report because we predicted that this would happen if Biden was elected president. While there are other reasons for oil prices going up such as the global economic reopening, lack of investment in the oil sector that has been going on, we made it quite clear that the policies that Biden was going to put in place would only exasperate the situation and that is exactly what happened.

The Wall Street Journal says that early last year, the Saudi-Russia group agreed to cut its collective output by some 9.7 million barrels a day, taking out the equivalent of about 10% of 2019 global demand when economies were shutting down. The move supported prices. As economies went back up, the group has restored a big chunk of that. On Friday, most delegates agreed to a deal to gradually undo the remaining cuts, some 5.8 million barrels a day, by increasing production by 400,000 barrels a day each month through late 2022. Reuters reported that, "OPEC+ ministers called off oil output talks on Monday after clashing last week when the United Arab Emirates rejected a proposed eight-month extension to output curbs, meaning no deal to boost production has been agreed. Saudi energy minister Prince Abdulaziz bin Salman had called for "compromise and rationality" to secure a deal after two days of failed discussions last week. But four OPEC+ sources said there had been no progress. OPEC's Secretary-General Mohammad Barkindo said in a statement on Monday the meeting had been canceled without a date for the next one being agreed. Even with the production increase that they were going to do it was the bare minimum that the market needs. Some suspect that may be part of this drama between Saudi Arabia and the UAE, because let's face it, it's only putting more money in their pockets.

Sadly, we are not seeing the U.S. oil and gas producer take advantage of this situation. Most people agree that we need to reduce our use of fossil fuels yet I think you have to have a better plan than the all-or-nothing approach by the Biden administration to reduce fossil fuel usage. They have these unrealistic goals of trying to go carbon neutral with technologies that don't exist but have not taken into account the real impact these higher energy prices are going to have on the economy and the lives of the average everyday American.

Obviously for oil and products and even natural gas we seem to be in a by the break mode. We've been warning about this supply squeeze for over a year and now everybody is on board as the reality of the situation has become clear, wow! A surprise agreement between Saudi Arabia and the UAE may settle things down. If we don't get an agreement, then prices are probably going to head up to the mid-80s. The Saudis are so convinced that this is going to last that they've already raised the selling price for crude oil to Asia.

Natural gas markets are getting a boost because of the hot temperatures that we saw in the Midwest. Andrew Weisman of EBWanalytics says that signals for natural gas are mixed. On the bearish side, the outage at Markwest’s gas processing plants in West Virginia has ended, allowing production in the Northeast to rebound. This recovery has been offset though by: (i) a significant gain in CDDs over the weekend; (ii) the likelihood that EIA will report an extremely small injection Thursday; and (ii) a continued surge in European gas prices. So far, in electronic trading, bullish changes have prevailed. Model runs tonight will determine whether these gains are retained.

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