185 - As oil prices rise, China looks at a SPR release | Dr. Dean Foreman with the API

Energy Week

Two Anne Arundel power plants announce plans to transition from coal to oil, get green light from Maryland Public Service Commission
https://www.baltimoresun.com/news/environment/bs-md-brand-shores-ha-wagner-coal-to-oil-psc-approval-20220113-zdwx3gcwjvbtzjn3blqdhyqux4-story.html
- what benefit will switching from coal to oil provide? power plant says it will only operate at 8% of capacity to emit less emissions because oil costs more
Oil's bull run rolls on despite possible China reserves release
https://www.reuters.com/business/energy/oil-eases-investors-eye-us-oil-release-china-demand-concerns-2022-01-14/
- people traveling ahead of Lunar New Year incase of lockdowns
- won't have much of an impact on prices, at least outside of China
- What's going on with inflation in China? is it an issue?
China's 2021 oil refinery output rises 4.3% to record on strong demand
https://www.reuters.com/world/china/chinas-2021-oil-refinery-output-rises-43-record-strong-fuel-demand-2022-01-17/
U.S. talks to energy firms on EU gas supply in case of Russia-Ukraine conflict
https://www.reuters.com/business/energy/exclusive-us-talks-energy-firms-over-eu-gas-supply-case-russia-ukraine-conflict-2022-01-15/
- companies say that there isn't oil to spare
- Russia supplies 1/3 of natural gas to Europe
Europe’s Governments Face a Reckoning as Energy Prices Surge
https://finance.yahoo.com/news/europe-governments-face-reckoning-energy-050012699.html
- energy prices dropped 10% on news of more LNG cargoes, slightly higher temps
Special Guest Dr. R Dean Foreman on Dec 2021 MSR
- Demand strength has been resilient - turned up by Omicron. More driving, less flying, higher diesel, more intermediate petrochemicals needed for medical plastics
- IEA shows 101 million bpd demand in December 2021
- Continued global very strong demand growth
- strongest distillate demand since 2014 driven by trucking
- Lower exports of refined petroleum products in December - seeing level of refining activity has ratcheted up but still lowest throughput. We are now importing more and the difference between WTI and Brent is lower. Dearth of domestic production. Such a minimal difference has reduced margins and made US refining less desirable abroad.
- We are seeing both a drop in refining activity relative to where it would have been in 2019. Also exports are down. Getting a double whammy hit. Feedstock isn't cheap anymore.
- Inventories exclude SPR tracking. We are using SPR to politically manage prices. But if economy globally stays on track and supply can't keep up, may actually need SPR reserves to alleviate shortages
- Crude oil inventories below 5 year average
- Market needs barrels to make ends meet. Investment is needed in new oil production.
- If you take apart EIA Short Term Energy Outlook - last year EIA was showing 5 million bpd demand rebound but less production rebound. This year think we will see 3.5 million bpd demand rebound but MORE production to come from US. But can't see with US drilling activity can't see how we can get to 1.2 million bpd of growth as an average. We will need to add barrels every week to get to what EIA thinks we will be doing.
- The DUCs aren't completely gone but are cut in half at least in Permian. Half of completions in Bakken were DUCs last year. But even with more DUCs we will need more production growth.
- Refiners have adapted to lower jet fuel demand. They can change the mix if needed. But if jet fuel demand comes back can the market accommodate it?
- Jet fuel had been strengthening and then collapsed in December
- Urban gasoline deliveries down but rural gasoline deliveries up
- Economy in US and Europe, despite all the headwinds, is strong. Need to make sure things remain affordable for consumers.
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