Fed Chair Expects Omicron Impacts to Be Short-Lived
January 12, 2022
The API report released yesterday had crude oil stocks down 1 million barrels, gasoline stocks up 10.86 million barrels, and distillate stocks up 3 million barrels. If we see a build like that is gas today on the DOE it might have some selling pressure on RBOB. On the other hand, now that WTI crude oil has traded through the $80 dollar level it has room on the upside to test $84.
The Federal Reserve Chairman, Jerome Powell was before congress yesterday and some of his comments helped fuel yesterday’s rally. He said that he expected the economic impact of Omicron to be short-lived. He also said that he expected the last three quarters of the year to be very positive for the economy. There are other economists that think the Fed is already behind in raising rates. From Bloomberg, money manager Jeffery Gundlach said he sees “recessionary pressures” building.
The US Dollar also was moving lower yesterday, which is a positive for commodities in general and especially crude oil prices.
EIA reported their monthly short-term energy report (STEO) yesterday and is forecasting US crude oil production 46,654 BPD lower for 2022 versus last month’s forecast. EIA raised its WTI crude oil forecast by $4.92 for 2022 up to $71.38. The raised retail gasoline and diesel prices for 2022 by 14 and 18 cents, respectively up to $3.33 and $3.06 for 2022. The EIA also reported that oil supplies will show a slight decline in the first quarter of this year which is different from the last forecast. The market had been concerned that supplies would not be able to keep up with demand last year and that outlook help drive prices higher. But as OPEC+ increase quotas and other factors helping production the narrative changed in the last couple of months. Now we are back again calling for a supply deficit as the outlook is that Omicron will not squash demand. Of course, cases of covid are increasing and it has created some worker shortages in key markets and industries. The continued outbreaks in China has some economist now worried that this latest round will create new supply chain issues.
The estimates for today’s propane inventory update projects stocks to be down 2.3 million barrels.