Energy Markets Rally on Supply Concerns
March 2, 2022
The API weekly inventory report showed crude stocks were down 6.1 million barrels. Gasoline stocks were down 2.5 million barrels and distillates were up 392,000 barrels. The market is very fearful about energy supplies as it appears Russian energy exports will get shut off either by a boycott or new sanctions. This news appears to have sent energy products up another 20 cents and crude up 6 dollars.
The estimates for today’s DOE inventory report call for crude to be up 2.23 million barrels, gasoline down 1.285 million barrels and distillates down 1.701 million barrels. The estimate for today’s propane inventory report is for stocks to be down 2.89 million barrels.
The US and other major countries agreed on a coordinated release of strategic oil reserves yesterday. The IEA said the release was 60 million barrels from stockpiles around the world. Half of that amount will come from the US’s strategic reserves. The market appears to have given this no attention at all – as it represents less than one day’s worth of world oil demand.
“The situation in energy markets is very serious and demands our full attention. Global energy security is under threat, putting the world economy at risk during a fragile stage of the recovery” said IEA Executive Director Fatih Birol.
According to a Reuters survey, the increase in OPEC’s oil output in February exceeded the rise planned under the OPEC+ deal for the first time since September, as higher Saudi Arabian and Iraqi supply combined with fewer outages in smaller producers. OPEC produced 28.39 million BPD in February, up 420,000 BPD from the previous month and above the 254,000 BPD increase called for under the supply deal. Bloomberg reported that OPEC’s production increased by 380,000 BPD to 28.55 million BPD.
As the fear of not enough supply grows, it appears the energy markets are now trying to rally to the point to cause demand destruction.