IIR RGMI Insights: Weekly wrap up.. & the EIA Weekly #'s with Fundamental Analytics _ Mar. 18th
Good day,
Hope all are well this last Friday of March in these continuing to be uncertain times as Russia’s invasion of Ukraine enters its fifth week -- where the overall outcome remains murky and will not be fully understood for some time yet.??
As the US Administration said Thursday that Russia should be removed from the G-20, the group that represents 20 of the world's largest economies, as Western allies gathered in Europe to discuss fresh support for Kyiv.
That includes imposing further punishment on Moscow?one month after Russian President Vladimir Putin launched the continent's biggest conflict?since World War II.
Ukrainian President?Volodymyr Zelenskyy?urged an increase in military aid for his country during an address to the NATO summit in Brussels via video link. The Ukrainian leader’s ability to rally countries to Kyiv’s cause in video messages from the capital has served as a symbol of Ukraine’s defiant defense and Russia’s struggling advance.
Biden and U.S. allies were also set to discuss?moves to bolster NATO’s eastern flank?and how to counter the prospect of escalation from the Kremlin amid fears of a chemical or even nuclear attack.
The White House has established a team of national security officials to?plan scenarios should Putin use chemical weapons, according to a senior administration official.
But we know there will continue to be fall out like Germany and diesel affecting consumers throughout the European Union into the wider world
German workers and families will receive extra cash, cheaper petrol and cut-price public transport tickets to help them shoulder soaring power and heating costs after Russia's invasion of Ukraine, Germany's ruling coalition said on Thursday.
The deal between Chancellor Olaf Scholz's Social Democrats (SPD), the ecological Greens and the pro-business Free Democrats (FDP), struck after talks that ran deep into the night, should ease tensions over how to respond to ballooning energy costs that are squeezing households and companies.
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Though some pundits are stressing that the consumer household should face more directly these ballooning energy costs as this will lead to necessary demand destruction which would aid in balancing these markets
As the Russia-Ukraine crisis has sent global commodity prices zooming along with supply constraints, elevated oil?prices are starting to?worry consumers across the globe.
Analysts are betting on whether the?high crude oil prices?this year and possibly even next year will eventually lead to demand destruction.
''We have seen price control in some countries, which has been artificially kept the demand up. But, if?the high oil price is passed on to the customers, then demand destruction is a possibility," said Vikas Halan,?Associate Managing Director of Moody's Investors Service in an exclusive interview with CNBC-TV18.
For Mr. WTI Oil Market is testing breaking through $115 and possibly moving higher.?Much higher say some experts.
The?price of oil?trades to a fresh weekly high ($115.40)?amid an unexpected decline in US inventories, and crude may continue to retrace the decline from the yearly high ($130.50) if the?Organization of Petroleum Exporting Countries (OPEC)?stick to the current production schedule at the next?Ministerial Meeting on March 31.
CRUDE OIL PRICE OUTLOOK HINGES ON OPEC MEETING
The?price of oil?appears to have reversed ahead of the 50-Day SMA ($95.32) as it extends the series of higher highs and lows carried over from last week, and current market conditions may keep crude prices afloat as data prints coming out of the US point to strong demand.
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Not only might from the upcoming OPEC+ meeting at the end of this month shift the direction of crude pricing with pressure being to the downside as more supply might be brought into the world markets; but, we cannot forget that the COVID pandemic story itself is still playing out
China is fighting the worst Covid outbreak since 2020,
and analysts are considering a revision of their oil demand forecasts as refineries reduce run rates and lockdowns hurt consumption.
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IIR Energy _ RGMI ~ Refining Intel Answers _ Refining Index
According to?Bloomberg, because of the outbreak and the lockdowns following it, some independent refiners—commonly known as teapots—were forced to resell oil cargos they had ordered. The lockdowns have reduced traffic in some cities as well as air travel, prompting refiners to reduce processing rates, the report also said.
Yet the repercussions of the outbreak go beyond refineries. The Wall Street Journal?reported?that factories in areas that have gone under lockdown would not be able to keep up manufacturing rates, potentially exacerbating an already existing shortage and extending the global economy’s uncertain path to post-pandemic recovery.
Even before the lockdowns, many economies were struggling to return to growth, but now their immediate future has become even more uncertain.
“That’s the new wrinkle in the story that we’re grappling with,” the WSJ quoted the chief economist of JP Morgan, Bruce Kasman, as saying. “Right now I don’t want to think too much about where we’re going to be six or nine months from now because there are too many moving parts,” he also said.
But it is not just what is unfolding in Asia as Europe is dealing with outbreaks as well
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Several European nations are facing a new spike in Covid-19 cases because they scrapped pandemic restrictions too soon, a senior World Health Organization (WHO) official has warned.
The coronavirus is back on the rise in 18 European countries, including the United Kingdom, France, Italy and Germany, Hans Kluge, WHO’s regional director for the continent, told reporters Tuesday.
He blamed in part a sudden change in policy in those nations, saying they lifted measures “brutally, from too much to too few.”
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In IIR’s Crude & Products Market Scorecard earlier this week, I spoke to the volatility in oil prices – as a super bouncy ball – for as Bruce Kasman was quoted above, “there are (just) too many moving parts” in these uncertain commodity markets
A super bouncy ball?is what these energy commodities remind me of at this time. With the question on everybody's lips: "Which way is this ball going to end up bouncing and into whose hands?" For oil prices, this ball is bouncing to $110 and likely to broach $120 and beyond, forcing some traders to run for the exits as volatility runs rampant--in fact to the point that global commodity markets are "seizing up." And, as one knows, the world is dealing with hyperinflation as central bankers wrestle with what steps to take - in the U.S., the Fed is embarking on a campaign of interest rate hikes; whereas other central banks like Japan are choosing to keep their policy more stimulative in nature. But it is not just a war, high commodity prices, and inflationary pressures that require resolution; the world is poised to step into a food crisis which likely will be catastrophic in nature...
the ball bounces on...
Bringing it back Stateside inventories fall further whilst global supply is impacted
WTI crude oil and RBOB gasoline prices Wednesday rallied sharply and posted 2-week highs.?Crude prices jumped Wednesday morning after a major Black Sea crude export terminal shut down due to storm damage, compounding global supply risks.?Crude and gasoline prices raced to their highs late Wednesday morning after weekly EIA data showed U.S. crude supplies and products fell more than expected last week.
IIR/DOE?Weekly Refinery Report for the Week Ending on March 18th, 2022
As the Russian invasion of Ukraine enters its fifth week, US and NATO leaders are scheduled to meet tomorrow to discuss additional sanctions on Russia, though the outlook for a European ban on Russian oil and gas appears mixed. Fears over how the war could affect global crude oil supplies in an already tight market drove up crude oil prices by over $15 per barrel over the last week, with West Texas Intermediate trading at about $114 per barrel early Wednesday. Rising crude oil prices have pushed retail gasoline prices in California to an average of $6 per gallon, significantly higher than the US average of $4.24 per gallon. An estimated one-sixth of Chevron employees at its Richmond, California, refinery went on strike over an impasse in contract negotiations. US crude oil production remained at 11.6 mbd for the week ended March 11, the 6th consecutive week production has stayed flat. Russian crude oil exports will be down about 1 mbd for as long as two months as repairs are made to the Caspian Pipeline Consortium, which was damaged in a storm. TotalEnergies said it will stop buying Russian crude by yearend 2022. The world’s three largest oilfield services companies - Halliburton, Schlumberger, and Baker Hughes - last week announced they will immediately suspend operations in Russia in protest over its invasion of Ukraine. Against this backdrop, the?DOE?today reported that US crude oil inventories fell ▼ 2.5 million barrels to 413.4 million barrels for the week ended March 18.
Leaving you with this
A month into the conflict, most of those fears are coming true. Inflation has shot up mainly due to higher energy and food prices, a shortage of wheat is deepening the food crisis in countries like Egypt, and economic growth is stalling, prompting economists to cut global growth forecasts. "Over time, global commodity trade flows will need to adapt to some or all of Russian/Ukrainian supply being unavailable, whether due to infrastructure damage, sanctions or ethical concerns," major commodities trader Glencore said in its annual report last week.
Aluminum's sanction woes:?Aluminum prices have been skyrocketing over the past month, surpassing the peak they hit in 2008 during the global financial crisis.?
Deepening food crisis:?The war in Ukraine has hit supplies of wheat, corn and sunflower oil in several parts of the world, prompting U.N. Secretary-General Antonio Guterres to warn of a "hurricane of hunger and a meltdown of the global food system." Russia and Ukraine together account for about 30 per cent of global wheat exports. The two countries together account for 80 per cent of the world's sunflower oil exports.
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