Energy Markets Test Upside As Ukraine-Russia Tensions Grow
February 7, 2022
Last week was another impressive week for energy markets as they continue to test the upside as they are pushed by the ongoing geopolitical risked from Russia and Ukraine, Iran backed Houthi rebels and UAE and Saudi Arabia, the cold blast that hit Texas and shut down some production there, and the US dollar falling by 1.8% last week.
Baker Hughes report that oil rigs were up 2 to a total of 497 the highest level since April 2020.
On Wednesday, the ADP private-sector payrolls number was bad but on Friday the Department of Labor’s nonfarm payrolls number told a different story. This had the economy adding 467,000 jobs in January and the expectation was just 125,000.
German oil trader Mabanaft is still working to resolve the breach to its IT system following a cyberattack. The cyberattack targeting fuel storage stretched into its sixth day on Friday. The hack has left German fuel depots unable to load onto trucks.
Gasoline demand fell by 3.7% from the week prior according to GasBuddy data. Demand was down strong in the latter part of the week as a large winter storm blanketed a large porting of the US but hit PAAD 2 (Midwest and PADD 3 ( Gulf Coast) hard as both saw demand down over 7%.
News headlines have a lot of stories about the Iran and US negotiations on the nuclear pack. Iran has barrels of oil that are sanctioned from the market and a deal to re-establish the nuclear agreement with Iran could bring those barrels to market and help ease prices. The market has heard this before and I am skeptical, but President Biden wants to help ease energy prices and appears to be working to get any progress on this deal to give the market some hope and price relief.