Omicron May Be Stifling Energy Demand
January 6, 2022
The DOE report had crude stocks down 2.14 million barrels, Cushing, Ok crude stocks were up 2.57 million barrels. This was the 6th straight week that US crude oil inventories declined. Gasoline stocks were up 10.13 million barrels and distillates were up 4.42 million barrels. It was a bit interesting that the products had a big build and prices were able to still rally strongly. There were reports of some unrest in Kazakhstan that may have provided the push yesterday. But prices did sell-off late in the afternoon and left the daily charts giving the bears a chance, but they must see more follow-through lower, if not the trend is still up.
Overnight the Russian military arrived on the scene in Kazakhstan to try and help stop the unrest. The protestors did overtake some government buildings and there have been deaths on both sides. This situation and the decline in production from Libya continue to offer support to crude oil prices.
Propane stocks were down 734,000 barrels, with Midwest stocks down 663,000 and Gulf Coast stocks up 115,000 barrels. This was not a supportive report for propane. Despite a little cool down the longer-term forecast seems to be drifting back to warmer than originally forecast so prices are steady with no positive demand outlook.
The implied demand for both gasoline and diesel in the DOE report was down strong and were bearish prices, this is a concern still being raised about the impact of Omicron on demand. But there are others, like OPEC+ that see very little demand impact due to the virus. JPMorgan and others are still forecasting stronger demand in 2022 and have positive economic outlooks which continue to support the markets.
The 10.128 million barrel gasoline stock build was the largest weekly build in gas since April 2020. Implied gas demand was down 1.7 million BPD at 8.642 million BPD. Distillate stocks built 4.418 million barrels and demand was down 749,000 BPD at 4.551 million BPD.