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Oil prices seemed shocked that a real oil supply disruption could raise prices while Exxon Mobil is warning of a coming oil shock unless the world ups its investments in fossil fuels. Risk of oil shortages and risks of war rising and falling are dominating the oil trade.

The Libyan supply disruption was a major factor in yesterday’s oil surge. The market realized that light crude is harder to come by. The politically based shutdown of the Libyan oil fields could create an oil price shock if it is extended for weeks. Yesterday Libya’s eastern or parallel government said it would shut down all oil production and exports nationwide, over the status of central bank’s Gov. Siddiq al-Kabir.

Reuters reported that the Benghazi government is not internationally recognized but controls most of Libya’s oilfields. The Tripoli-based National Oil Corporation, which controls oil resources, and the internationally recognized Tripoli government, have not yet confirmed the news. Because this dispute is based on politics, there is a sense by the market it could be resolved. If it is not, then get ready for a price shock.

Exxon Mobil is warning of a “catastrophic” risk of failing to invest in new oil projects. AFP reported that Exxon says that global oil demand is unlikely to fall by 2050 despite progress on renewable energy, the US oil and gas giant ExxonMobil said Monday, pointing to rising population and demand for energy worldwide. ExxonMobil said it, “sees a plateau in oil demand beyond 2030, remaining above 100 million barrels per day through 2050.” This would be roughly in line with oil demand last year of 102.2 million barrels per day, according to the International Energy Agency. The figure is significantly higher than projections from its competitor BP, which predicted earlier this year that oil demand would decrease to around 75 million barrels per day by 2050 on its current trajectory.

In its report, ExxonMobil estimated that around four billion people around the world do not currently have access to the energy they need. The company said that the global population expected to rise from eight billion to almost 10 billion by 2050, meeting the world’s basic energy needs “will drive a projected 15% increase in total energy use worldwide between now and 2050,” the company said. “Renewables will play an important role,” it added. “So will oil and natural gas.”

ExxonMobil estimates that oil and natural gas will still make up more than half of the world’s energy mix by 2050, even as the proliferation of electric vehicles reduces the demand for gasoline at the pump. “The large majority of the world’s oil is and will be used for industrial processes, such as manufacturing and chemical production, along with heavy-duty transportation like shipping, trucking, and aviation,” the company said.

Despite this, ExxonMobil still expects global carbon emissions to decline by around 25 percent by the middle of the century, thanks to greater energy efficiency, more renewables, and the introduction of new “lower-emission technologies” like carbon capture and storage.

While oil prices soar, crack spreads are still weak hitting the lowest level since February 2021. That is a warning sign but it seems out of whack on what we are seeing on the supply side. I expect to see a drawdown in crude supplies of 3 million barrels. Gasoline supplies in distillate supplies should also fall by three million barrels, respectively. Refinery runs should remain steady. Despite the weak crack spread, gasoline demand was close to a record last week. Diesel demand was weaker than normal. If the demand numbers continue to hold up, the crack spread should recover.

War threats are also up and down. Reuters reported that Russia launched several waves of missile and drone attacks targeting scores of Ukrainian regions and killing at least four people, Ukraine’s military said. This came a day after Moscow’s biggest air attack of the war on its neighbor.

They also reported that the chairman of the Joint Chiefs of Staff, Air Force General C.Q. Brown, says the near-term risk of a broader war in the Middle East has eased off slightly after Israel and Hezbollah exchanged cross-border fire without further escalation. Let’s hope and pray.

Natural gas would see an injection of 33 BCF. The record heat index numbers including portions of the Midwest are not enough to keep the market strong because we’re headed quickly into shoulder season. Still we expect to see record demand and we should be very thankful that some of the Biden administration’s rules on power plants haven’t gone through yet because if it did, there would be people collapsing from heat stroke today.

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