Why Is Crude Dropping

[JohnyMac]

I fired off an email to my investment friend asking him, why are crude prices falling. His response was...

From the city of Changchun to the city of Shenzhen in the northeast corner of China, is shutdown due to a new outbreak of Covid. This shutdown affects approximately 30M people. Consequently, this region is not buying crude. This leaves a glut on the market for at least a couple of weeks. 

Chinese authorities on Tuesday tightened anti-virus controls at ports, raising the risk of trade disruptions after some auto and electronics factories shut down as the government fights the country's worst COVID-19 outbreak since the start of the pandemic two years ago.

China this week banned most people from leaving a coronavirus-hit northeastern province and mobilized military reservists Monday as the fast-spreading "stealth Omicron" variant BA.2 fueled a surge in infections.

Stock prices in China and Hong Kong sank for a second day following the shutdown on Monday of Shenzhen, a tech and finance hub adjacent to Hong Kong in the south, and Changchun, an auto center in the northeast. Bus service to Shanghai, China's business capital and biggest city, was suspended. - CBS News

I suspect gold will fall too.

Also, as a side note...The Fed is going to raise interest rates tomorrow. Probably around .75%. Martin Armstrong thinks this will cause several weeks of vulnerability. I think this is a great time for the correction to the high 28,000's in the DJIA. Other markets will follow.

Stay tuned.

[DMCakhunter]

JM,

Notice that while crude has fallen a lot, fuel prices are not falling as fast.
There is still a shortage in the global market as russian oil is still sorting out who will buy it.
Europe is in a terrible position. They have access to enough oil/gas to cover their energy needs but not enough for the majority of their chemical industry. North America will be shipping large quantities of finished chemical products to europe which will cause shortages here. Sucks but that is where the money is.
Not sure if the Dems will get sanctions removed from Venezuela, but they don't have much oil to spare as China is owed a lot of it.
Oil will spike again soon.

[JohnyMac]

Yupper DM. 

One reason that petrol does not fall at the gas pump as fast as the price of crude is due to what is paid for the gas already in the ground. The gas station has to recoup the $$$ paid for the stuff already in the ground. That is why stations that cater to a large amount of customers will fall in price before the slower ones will.

Diesel has not moved at all (~$5.50 a gallon) while petrol has dropped here ~$.10 since same time last week. Still at ~$4.35 a gallon now.

[JohnyMac]

Gold currently at $1,918- an oz. A week ago it was $100- more. Talk about vulnerability.

If you were going to buy, today would be the time. Before the Fed increases the interest rate.

[DMCakhunter]

Our diesel around town is $4.56, $4.99 - $5.25 at truck stops.
10% ethanol gasoline is around $3.69.

[Nemo]

My truck is an E-85 vehicle.  I filled up with it a week ago today at $3.35/gallon.  Signs on the pump said 51-85% ethanol and 94 octane.

I do not know what actual percents were.

Nemo

[Nemo]

Its doing some pretty good dropping.  The China Virus is spreading over there again.  For the best "current" pricing info check oilprice.com

Nemo

https://www.cnbc.com/2022/03/15/oil-drops-again-now-more-than-25percent-below-recent-high.html

For better, more detailed, expert info:

https://oilprice.com/Energy/Energy-General/Why-Oil-Crashed-Below-100.html

might want you to sign up for all that secret info

[DMCakhunter]

To refresh the data - Diesel is now at $5.07 and 10% ethanol at $3.89.
Diesel is going to continue to increase since the US is sending 30-40% of domestic production to Europe to help them stop using Russian product.
Spot diesel in the gulf is up today $.41 to $5.55.
 

[JohnyMac]

Diesel just went from $5.49 to $5.99 here. Yupper, 50 cent jump in one day.

[JohnyMac]

Oh, I am wrong. Tuesday diesel was $5.39 an hour ago it was $6.29 a gallon 



Get ahead of this and buy what you need now before trucking companies and manufactures can react.

[Nemo]

Numbers about 3 hours old.

Nemo


https://oilprice.com/

WTI Crude ?    104.7    -0.67    -0.64%
Brent Crude ?    109.3    +1.75    +1.63%
Natural Gas ?    7.244    +0.356    +5.17%
Heating Oil ?    4.782    -0.354    -6.89%

And some interesting commentary.

https://oilprice.com/Energy/Energy-General/Demand-Destruction-Is-Delaying-An-Oil-Supply-Crisis.html

Demand Destruction Is Delaying An Oil Supply Crisis
By Josh Owens - Apr 29, 2022, 2:00 PM CDT

Oil prices are on course for a fifth straight monthly increase despite significant demand destruction in China, a trend that highlights just how big the current supply problem is.

Friday, April 29, 2022

As we are getting closer to next week?s OPEC+ meeting, the market has been increasingly questioning the necessity of yet another formal rubber-stamping of monthly production quotas. With Russia?s production down by almost 1 million b/d compared to February levels and Libya constantly battling supply disruptions, the oil group?s compliance rate is only going to increase. Despite a significant drop in demand from China, oil is set for a fifth straight monthly gain, with ICE Brent settling in at around $110 per barrel.

Russia Cuts Poland and Bulgaria Gas Supply. Russia halted gas supplies to Poland and Bulgaria after the countries refused to open new bank accounts and pay for Gazprom (MCX:GAZP) deliveries in roubles, a decision that the European Commission denounced as blackmail.

OPEC+ Expected to Ram Through Another Agreement. Already in their second year of supply discipline, OPEC+ countries are expected to greenlight another 432,000 b/d monthly increase for June at their monthly 05 June meeting, even as Kazakhstan and Russia have been going down in terms of oil production.

Russia?s Sakhalin-1 Goes into Force Majeure. The Sakhalin-1 project in the Russian Far East, producing some 270,000 b/d of crude, saw its operator ExxonMobil (NYSE:XOM) declare force majeure as it became increasingly difficult to ship crude from there.

US Congress Vows to Go After Oil Companies. US Democrats in Congress have accused domestic oil companies of gouging and profiteering off high gasoline prices, seeking to introduce legislation that would allow the US Federal Trade Commission to go after them and double the penalty to $2 million per day.

ExxonMobil Makes Three New Stabroek Discoveries. US oil major ExxonMobil (NYSE:XOM) made three new discoveries in offshore Guyana, namely Patwa, Barreleye, and Lukanani, taking the total recoverable resource of the Stabroek Block to 11 billion barrels.

No One Knows How To Pay for Russian Gas. Amidst the continent-wide confusion as to whether using Gazprombank accounts to pay for Russian gas breaches EU sanctions, Germany?s economy ministry stated that if the companies declare that contracts have been fulfilled with the euro payment, it should not contradict the sanctions regime.

China to Cut Coal Import Tariffs to Zero. As domestic coal production reached an all-time high of 395 million tons in March, China scrapped import tariffs altogether from May 01 amidst unprecedentedly high global prices, potentially freeing up the way for more discounted Russian coal into the country. 

Chevron Signs Up for Suriname Block. Suriname?s state oil company Staatsolie and US oil major Chevron (NYSE:CVX) signed a production sharing agreement for exploration and production for the offshore block 07 in the west of the shallow offshore area, with the latter taking an 80% stake in the project.

Glencore Cuts Guidance on Metals Production. Citing operational challenges and COVID-related drawbacks, UK-listed trading major Glencore (LON:GLEN) lowered its 2022 production guidance on cobalt, copper, and zinc by some 5-10%, with the latter two seeing a 15% q-o-q decline in Q1 2022.

Shell Tightens Russia Restrictions on Crude Buying. UK energy major Shell (LON:SHEL) revised its restrictions on buying Russian oil, stating that it would no longer accept products with any Russian content after rumors of an emerging ?Latvian Blend? stoked fears of tacit blending.

Germany Wants to Take Over Rosneft Refinery. Germany is preparing to take over the Schwedt refinery operated by Russia?s state-owned oil company Rosneft (MCX:ROSN), the only refinery remaining in the country that is running predominantly on Russian oil, in a drive to bring total imports to zero.

No Quick COVID Rebound Looming for China. Despite a five-day Labour Day coming up, China's crude demand is set to stay depressed as some 180 million residents remain under some form of lockdown, with gasoline and demand still more than 25% below year-ago levels and jet fuel demand down more than 50% year-on-year.

US Sues Leading Metals Producer. The US Securities and Exchange Commission sued Brazilian miner Vale SA (NYSE:VALE) over ?false and misleading? dam claims following the 2019 Brumadinho dam disaster that killed 270 people, saying that the firm knew about the dam not meeting international standards.

Shell Doubles Down on Indian Renewables. UK oil firm Shell (LON:SHEL) agreed to buy India?s renewable energy-focused company Spring Energy for $1.55 billion, boosting 2.9 gigawatts-peak of solar and wind projects, becoming the third energy major to do so after BP (NYSE:BP) and TotalEnergies (NYSE:TTE).

By Josh Owens for Oilprice.com

[Nemo]

Not dropping now.  Trending back up.

Nemo

https://oilprice.com/

WTI Crude -----     97.91      +0.65      +0.67%
Brent Crude----    107.5      +0.83      +0.78%
Murban Crude--    106.3      +3.66      +3.57%
Natural Gas-----     8.487    -0.067      -0.78%

[Nemo]

And OPEC is helping*.

Nemo

*themselves


https://www.foxbusiness.com/markets/opec-meeting-may-consider-output-cut-week-report

Oil
Published October 2, 2022 5:47am EDT
OPEC+ meeting may consider output cut this week: report
Oil producers are considering reducing production due to fears that interest rate hikes will slow the global economy
By Ken Martin FOXBusiness

OPEC+ is meeting this week to decide on production.

The group of oil producers will reportedly consider cutting output by more than 1 million barrels a day, delegates tell Bloomberg.

The meeting will take place on Wednesday in Vienna.

A production cut would reflect the concern that the global economy is slowing fast in the face of rapidly tightening monetary policy.

Oil prices have also been affected by the stronger dollar.

A final decision on the size of the cuts won?t be made until ministers meet, the delegates said.

Brent crude soared above $125 a barrel following Russia?s invasion of Ukraine in February.

It?s since dropped to $85, cutting into the profits that Saudi Arabia, Russia, the United Arab Emirates and other members of the coalition have enjoyed.

Oil prices dipped on Friday in choppy trading but notched their first weekly gain in five on Friday.

Brent crude futures traded at $87.96 a barrel. 

U.S. West Texas Intermediate (WTI) crude futures fell to $79.49.

Oil fell 25% in the quarter that ended Friday.

Banks, including JPMorgan Chase & Co., said OPEC+ may need to lower output by least 500,000 barrels a day to stabilize prices.
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