Russia Requests Energy Payments in Rubles
March 31, 2022
The DOE inventory report had crude oil stocks down 3.45 million barrels, gasoline stocks were down 790,000 barrels, and distillates were up 1.4 million barrels. This week’s build in diesel and a small decline in gasoline have put both above their five-year average for this time of year. This is a positive step for inventories that have been on the low end. Crude stocks are still below their 5-year average and below the fiver year average range low.
Propane stocks had a build of 145,000 barrels putting total stocks at 33.709 million barrels and last year at this time there were 39.247 million a 5.538 million barrel deficit. If the market, sees an average seasonal build over the next 6 months total stocks will approach approximately seventy-five million barrels. This would put us in a very similar situation as last year. We were able to make it through last year unharmed, but we had a comfortable winter with no bitter cold. Assuming a normal build to stocks take place then the unknow is what type of winter it will be and if we get something colder than normal it will be a challenge.
The energy markets are trading lower this morning on the reports of the Biden administration getting ready to announce that they will release 1 million BPD from that SPR over several months with the total amount being 180 million barrels. These announcements usually sell the market off near term, but they then rally back as this is a near term band-aid that makes people feel good but does not solve the longer-term supply issues. The price of WTI crude dropped six dollars per barrel as this news was released in a story by Bloomberg.
The International Energy Agency member countries are also set to meet Friday to decide on a collective oil release. It is not clear if the US piece is part of this coordinated release.
Historically, SPR releases have temporarily sent oil prices lower and are then followed by higher prices as the market prices in insufficient supply,” said Josh Young, chief investment officer at Bison Interest. “It is likely that oil prices rise after an initial temporary pullback, and that the SPR may have to be refiled at even higher prices.”
Repeated stockpiles releases, meanwhile, will further thin the world’s supply cushion. “Each release is likely to have diminishing effects on the oil markets,” said John Paisie, president of Houston-based consultancy Strata Advisors.
There are also reports that the Biden administration is considering temporarily removing curbs on summer sales of higher ethanol-gasoline blends as a way to lower fuel costs for US consumers.
Russia has said it now wants to be paid in rubles for its energy. So far, the EU has refused this demand. But if Russia stops taking other payments this could cut off more energy supplies and the global supply situation tightens even more.