Energy Market Retreats from Recent Highs
March 15, 2022
The energy market continues to get sold off hard in the same fashion as it rallied to new 14-year highs. The market got an extreme push to the upside on the fears of not enough oil, and the market now appears to be getting an extreme push to the downside, as Russian energy still flows, and nothing has been disrupted. There could certainly be issues with Russian oil being sold into the market moving forward but right now the market is correcting all the concerns about Russian oil being cut off as this did not take place. The energy markets had a one-week rally that was up 42% and it took crude oil, RBOB gasoline futures, and ULSD future to 14-year highs. After this impressive run-up in prices speculators who were long, the market began to take profits and that selling continues.
Also pressuring price lower is the continued talks between Ukraine and Russia that could lead to a ceasefire.
The market is also again thinking about Covid as there has been an outbreak in China.
The US Federal Reserve begins its two-day meeting today and the market expects that they will increase interest rates. Despite the Federal Reserve talking about their plans to raise rates for months, there are still many who fear that raising rates will hurt economic growth.
The EIA released their monthly Drilling Productivity Report, and it showed the EIA is expecting oil production from the major shale producing regions in April to increase by 117,000 BPD from March levels reaching 8.708 million BPD. Much of this production gain is expected to be seen in the Permian region with an increase of 70,000 BPD reaching 5.208 million BPD in this region.
The US continues to work on the Iran nuclear deal which would allow the US to reduce sanctions and Iran to provide more oil to the market. Russia who has thrown up objections recently now seems to want the deal to get done soon. This news is also helping the selling today. But this will be a battle as Bloomberg is reporting that 49 of the 50 Republican senators said they will not back an emerging new nuclear deal between Iran and world powers.