Diesel Gas Shortage: What Stocks Are Impacted By A Diesel Gas Shortage?

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  • As the government has been focused on crude oil and gasoline, diesel gas supplies have drastically fallen to dangerously low levels.
  • With diesel prices going up, it will cost more to transport consumer goods, which means that inflation won’t taper off anytime soon.
  • See list below for sectors and stocks most impacted by the shortage.

While a lot of attention has been directed toward the prices of crude oil, diesel gas suddenly appears scarce as we head into the winter months. The Energy Information Administration (EIA) has stated that the U.S. now only has 25 days’ worth of diesel supply left, which is a dangerously low level. The Russian invasion of Ukraine has drastically impacted global energy supplies as refinery closures and disruptions in the U.S. have recently caused issues with the supply of diesel gas at a time when demand is surging due to the changing seasons.

With diesel fuel and heating oil inventories running low, inflation will remain high for the foreseeable future. Since diesel is the primary fuel source for trucks, rails and vessels that transport most consumer goods, it’s looking like the prices of these transported goods will also increase.

What’s happening with Diesel right now?

Bloomberg reported that the U.S. diesel crisis is here and will spread across the East Coast, where there are transportation delays. Diesel inventories are at the lowest seasonal level ever, heading into winter. The Energy Information Administration (EIA) announced that U.S. distillate inventory (including heating oil and diesel fuel) had 106.2 million barrels in the week ending October 14, which is about 20% below the 5-year average and a 25-day supply.

There are colossal supply and demand issues with diesel fuel right now. Since diesel fuel is similar to heating oil, the demand will skyrocket as the northern hemisphere enters the winter months where people will need oil to heat their homes. Some speculate that if reserves aren’t built up by the end of November, there could be severe consequences — similar to the European energy crisis. The supply issues are being caused partly due to the embargo on Russian oil and because the refining capacity in the U.S. has dropped over the past few years.

The price of diesel hit a record high of $5.816 per gallon in June, and there’s a chance that it could go higher if we have a cold winter or if the European energy crisis gets worse — both of which are still undetermined as of the time of this writing.

Policymakers have been focusing on crude oil prices to fight inflation, but it appears that the diesel gas shortage could offset this. Goldman Sachs has warned that the government’s focus on fighting higher energy prices has only been on crude prices, even though that has little impact on what customers have to pay for. It’s also believed that refinery closures and disruptions are leading to this shortage of refined products like diesel gas.

What stocks are impacted by a diesel gas shortage?

A diesel gas shortage impacts many companies since the fuel is needed to transport goods across the country.

These are the industries most impacted by a diesel gas shortage:

  • Trucking and transportation. Since most of our goods are transported by diesel fuel, any company in this industry is facing the potential of low diesel supplies that could drive prices up.
  • Construction. Many power trucks and excavators use diesel, the increased cost of transporting raw materials, will drive home construction prices even higher when people already have to deal with soaring loan rates. This would also impact the mortgage industry since consumers will think twice about borrowing money, making everything more expensive.
  • Fresh produce. The prices of fresh produce will continue to increase as it’s becoming more costly to transport the goods promptly.
  • Other consumer goods. With all of our goods being transported by freight or truck, there could be issues with getting items into stores in time for the holiday season as we reach dangerously low levels of diesel.

It’s fair to say that stocks in any of these industries could be impacted by the diesel gas shortage if they can’t get the goods out on time or if they have to raise prices. Higher prices would only hurt consumer confidence as the threat of a recession looms large.

When we looked at stock market winners, we discovered that many oil companies were doing exceptionally well in 2022. We will be watching to see if limits are imposed on the export of U.S. oil and natural gas, as this would impact earnings.

What stocks are impacted by the diesel gas shortage?

Suncor Energy (SU)

Suncor produces synthetic crude from oil sands, a method that’s unlike conventional oil production. With diesel gas prices going up, Suncor stands to benefit as the stock is up almost 40% for 2022. Suncor has hiked up its dividend recently, making this an attractive stock for investors.

Valero Energy (VLO)

Valero is one of the top oil refineries as they manufacture and market transportation fuels. The company is also the second largest producer of renewable fuels, which means it will stay profitable if the world turns to renewable energy sources. Valero beat the earnings estimate for the third quarter, and the stock is up about 67% for 2022.

PBF Energy Inc. (PBF).

PBF is a petroleum refiner and supplier of transportation fuels, heating oils and other petroleum products. The company is working on producing renewable diesel by 2023 which would be a major game changer in this space. This stock is also up over 200% for the year while the rest of the market has continued to struggle.

Even though there’s a growing concern about switching over to cleaner energy sources, it’s important to note this transition won’t be quick.

What’s the impact of a diesel gas shortage?

While there has been plenty of buzz about the European energy crisis and the growth prospects of electric vehicles, we can’t ignore that diesel is the primary fuel source for power trucks, rails and vessels transporting consumer goods. If diesel prices skyrocket, then the prices of the goods transported will also increase accordingly. With the holiday season approaching, this would mean that we could expect further increases in prices.

Experts also worry that diesel prices could tip the economy into a recession. As the Fed continues to fight inflation by raising interest rates, other factors are causing diesel prices to go up, which would then impact the costs of everything that’s transported. This would mean prices would still go up and cause inflation to soar despite the aggressive rate hikes.

Diesel prices are going up right now due to simple supply and demand issues. There are also disruptions to the global markets being caused by the Russia-Ukraine conflict and the current lockdowns in China.

What’s next for diesel prices?

As the supply of diesel gas dwindles and the demand continues to surge, actions must be taken promptly. The Biden Administration has considered limiting fuel export to help with the supply and prices. President Biden recently announced that they would be releasing 15 million barrels of oil from the strategic reserve in December to increase the supply. However, there’s no clear indication this would solve, or substantively help, us with the diesel gas shortage.

It’s important to note that this fuel is used for heating and trucking, which is generally required to keep the economy going, especially in winter. Diesel keeps commerce and freight going because trucks, excavators, ships and freight trains need the energy source. If there’s a shortage of diesel, we would see higher costs for everything in the economy, from transportation to construction, at a time when the Fed continues its aggressive rate hike campaign.

What does this mean for investors?

With the stubborn inflation numbers causing stock market sell-offs as the Fed continues to raise rates to attempt to cool down the economy, it isn’t clear where to invest your money. With additional concerns of prices going up even higher due to a diesel gas shortage, there’s even more risk involved with investing in individual companies.

Many experts agree that soaring inflation will invariably worsen if fuel prices continue to rise. Although there has been a lot of attention on crude oil, diesel gas issues could hurt us as much or more. With Q.ai’s Inflation Kit, you could turn those inflation fears around with an Investment Kit that helps you profit from higher inflation. With our unique Portfolio Protection feature, you can protect yourself further against continued volatility and unforgiving downturns.

The bottom line

The diesel gas shortage could pose many challenges if the refineries don’t increase capacity or if we don’t find ways to replenish supplies. If diesel gas prices continue to go up, consumers will feel this impact as the prices of everything will continue to increase. We will continue to monitor the situation with diesel gas as it’s an urgent matter at this time.

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Source: Diesel Gas Shortage: What Stocks Are Impacted By A Diesel Gas Shortage?


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Oil Prices Plummet As Dollar Soars And Global Recession Fears Grow

Crude oil prices hit their lowest levels since January on Monday. Getty Images

Oil prices continued to plummet on Monday, plunging to their lowest levels since January and continuing weeks of decline as fears of a looming global recession mount, inflation rates remain historically high and the strong performance of the U.S. dollar dampens demand.

The price of international benchmark Brent crude slipped below $85 a barrel for the first time since January on Monday morning. Brent futures for November slipped more than 1.5% to around $84.51 during early trading, recovering $85.34 at 9.44 a.m. London time.

West Texas Intermediate (WTI), the U.S. benchmark, dropped as low as $77.22 a barrel early Monday morning—its lowest level since early January—though it recovered and was trading at $78.57 4:52 a.m. Eastern time. The drop continues weeks of straight declines in oil prices, which caused both benchmarks to fall to their lowest levels since January last Friday.

Widespread fears of a recession and the strong performance of the U.S. dollar have dampened global demand for oil. The Dollar Index, which measures the U.S. dollar’s value against six other major currencies, hit a 20-year high on Wednesday and buyers using other currencies will have to spend more to buy the same dollar amount of crude oil.

Multiple factors have contributed to declining oil prices. As well as the dollar’s strong performance, soaring inflation rates and fears of a global economic downturn have dampened demand. Ongoing strict Covid curbs in China, the world’s largest energy consumer, has also pushed demand down. The impact of Russia’s invasion of Ukraine, which caused energy prices to skyrocket, has served to buffer oil prices against recession fears, though these fears now appear to be the key force driving the market.

I am a senior reporter for the Forbes breaking news team, covering health and science from the London office.

Source: Oil Prices Plummet As Dollar Soars And Global Recession Fears Grow

Critics by

Oil prices plunged about 5% to an eight-month low on Friday as the U.S. dollar hit its strongest level in more than two decades and on fears rising interest rates will tip major economies into recession, cutting demand for oil.

Brent futures fell $4.31, or 4.8%, to settle at $86.15 a barrel, down about 6% for the week. U.S. West Texas Intermediate (WTI) crude fell $4.75, or 5.7%, to settle at $78.74, down about 7% for the week.

It was the fourth straight week of declines for both benchmarks, the first time this has happened since December. Both were in technically oversold territory, with WTI on track for its lowest settlement since Jan. 10 and Brent for its lowest since Jan. 14. U.S. gasoline and diesel futures were also down more than 5%.

The U.S. Federal Reserve raised interest rates by a hefty 75 basis points on Wednesday. Central banks around the world followed suit with their own hikes, raising the risk of economic slowdowns.

“Oil tanks as global growth concerns hit panic mode given a chorus of central bank commitments to fight inflation. It seems central banks are poised to remain aggressive with rate hikes and that will weaken both economic activity and the short-term crude demand outlook,” aid Edward Moya, senior market analyst at data and analytics firm OANDA.

The U.S. dollar was on track for its highest close against a basket of other currencies since May 2002. A strong dollar reduces demand for oil by making the fuel more expensive for buyers using other currencies.

“We had the dollar exploding higher and pushing down dollar-denominated commodities like oil and growing fears over the looming global recession that is coming as the central banks raise interest rates,” said John Kilduff, partner at Again Capital LLC in New York.

The euro zone’s downturn in business activity deepened in September, a survey showed, suggesting a recession looms as consumers rein in spending and as governments urge energy conservation following Russia’s moves to cut off European supply.

Wall Street’s main indexes slid more than 2% on Friday as investors feared the U.S. Federal Reserve’s hawkish policy actions to quell inflation could trigger a recession and dent corporate earnings.The dollar <.DXY> index reached its highest in over two decades, pressuring oil prices. Russia launched referendums aimed at annexing four occupied regions of Ukraine, raising stakes of the war in what Kyiv called a sham.

On the supply side, efforts to revive the 2015 Iran nuclear deal have stalled as Tehran insists on closure of the U.N. nuclear watchdog’s investigations, a senior U.S. State Department official said, easing expectations of a resurgence of Iranian crude oil exports

Related News:

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MarketsSantos agrees to sell 5% stake in PNG LNG to state-owned Kumul – report, article with imageMarketsEastward gas flows via Yamal-Europe pipeline resume on Sunday, article with image

WorldAbout 746,000 still without power in Puerto Rico after Hurricane Fiona, article with imageOil Plunges To Lowest Level Since January—Here’s Why Experts Say Low Prices Won’t Last (Forbes)

Denmark warns on danger of spills from tankers carrying Russian oil (FT)Dollar Hits 20-Year High After Putin Mobilizes Troops And Threatens Nuclear War (Forbes)Oil Price Fundamental Daily Forecast – Crushed by Strong Dollar, Recession Concerns FX Empire

19:32 Fri, 23 SepGlencore ordered to pay almost $500m in oil price manipulation case Financial Mail19:05 Fri, 23 Sep
18:02 Fri, 23 Sep
Oil price: Russia irked with G-7 The Telegraph, Calcutta
Azerbaijani oil price nears $94 Azerbaijan State News Agency
10:53 Fri, 23 Sep
03:22 Fri, 23 Sep
22:20 Thu, 22 SepCrude Oil Price Forecast – Crude Oil Markets Give Up Early Gain FX Empire19:01 Thu, 22 Sep
17:32 Thu, 22 SepMalcy’s Blog – Oil price, JOG, Longboat, Getech. And finally… Proactive Investors (UK)16:55 Thu, 22 Sep
13:56 Thu, 22 Sep


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Dividend-Payers Still Shine Brightly As Stocks Stage Bounce-Back Rally

After seven straight down weeks for the S&P 500 Index and eight weeks of declines by the Dow Jones Industrial Average, stocks staged a big comeback from lows last Tuesday to finish the week with robust gains across the board. Sentiment gauges from the AAII survey to Investor’s Intelligence’s roundup of investment newsletter editor outlook had been flashing multi-decade highs in pessimism. Technically, put-call ratios had also spiked to levels associated with widespread panic. but now they are on the decline and helping to thrust stocks higher as pessimism recedes from unsustainable peaks.

The most important piece of economic news came out on Friday after the rally was well underway when the Commerce Department reported that the core personal consumption expenditure (PCE) price index rose at a 4.9% annual rate in April, which was a deceleration from the 5.2% pace in March. The report provided hope that the Federal Reserve would not need to be as aggressive as planned in hiking rates in the coming months. Next Friday’s nonfarm payrolls report for May will be another critical piece of data for handicapping the Fed’s moves.

By the end of the week, both the S&P 500 Index and the Russell 2000 Small Cap Index had both gained 6.6%. It would not be unreasonable to see this rally take the S&P 500 to it’s declining 50-day moving average, but there is a lot to prove for the bulls to make this burst of buying anything more than a rally within a larger downtrend.

The biggest gains last week came from the sector that has been the most beaten down this year: Consumer staples jumped higher by 9.5%. A 4.3% increase in crude oil prices helped drive the energy sector higher by 8.3%. Growth stocks outperformed value, and domestic equities performed better than international stocks.

Equity Income Universe: Last week, the top performing equity income funds that we track were the WisdomTree MidCap Dividend (DON DON +6.6%) and FlexShares Quality Dividend (QDF QDF +6.3%).

Dividend growth funds have been big underperformers this year, but the style shined last week with T. Rowe Price Dividend Growth (PRDGX +6.2%), WisdomTree U.S. Quality Dividend Growth (DGRW DGRW +6.2%) and Vanguard Dividend Appreciation Index (VIG VIG +6.2%) all gaining more than 6%.

Also jumping more than 6% were the year-to-date total return leader, Alerian MLP (AMLP AMLP +6.2%) master limited partnership ETF, and the VanEck BDC Income (BIZD BIZD +6.2%) business development company ETF.

FDI Portfolio Action: Last week’s Forbes Dividend Investor portfolio of 22 stocks gained an average of 4.87%, with only two stocks failing to post positive returns.

Our top performer was master limited partnership Holly Energy Partners, L.P. (HEP +8.9%). Also higher by more than 8% for the week were Luxembourg-based steel maker Ternium TX SA (TX +8.7%), chemicals maker LyondellBasell Industries LYB NV (LYB +8.5%), and International Business Machines (IBM +8.4%).

Capturing Call Premium On The Bounce

A medium-term bearish environment with at least a temporary burst of bullishness is one in which selling covered calls makes sense. Last Monday, we sold covered calls on Tyson Foods TSN (TSN +6.8%) and Kraft Heinz (KHC -0.3%). Both companies had ex-dividend dates last week.

Selling the same TSN $87.50 July 15 calls would now earn you $5.30, based on Friday’s closing price for Tyson of $91.04. With Kraft Heinz, the $39 July 1 calls we sold for $1.30 last Monday now trade for only $0.65-$0.70. Going out to the July 15 expiration and selling slightly in-the-money KHC $37.50 calls earns premium of $1.65-$1.70.

John Dobosz

I am the deputy editor of investing content for Forbes Media. I’m responsible for money and investing coverage on Forbes.com and in Forbes magazine.

Source: Dividend-Payers Still Shine Brightly As Stocks Stage Bounce-Back Rally

Highest Dividend-Paying Stocks in the S&P 500

Part of the reason we are seeing a “risk-off” environment on Wall Street in 2022 is because – for the first time in a long time – you can get a decent payday in traditional fixed-income investments thanks to a rising interest rate environment. Consider that 10-year Treasury bonds pay almost 2.9% right now – more than double the yield of last summer – while the S&P 500 averages a dividend yield of just 1.4% right now. Many income investors aren’t willing to settle for the risk of stocks when they can instead get significantly higher yield in bond markets. However, the following S&P 500 components offer a way to tap into outsized yield that may make them worth a look – with a minimum yield of 4.7% and payouts as high as 8.6% at current pricing.

By now, everyone knows how bad smoking is for your health. But as with sugary soft drinks or fatty fast food, just because something is unhealthy doesn’t mean consumers will stop buying it. And as we enter a period of volatility for the stock market thanks to price inflation, many investors are learning that smokers are incredibly reliable customers. That makes $160 billion tobacco icon Philip Morris a slam dunk thanks to leading brands such as Marlboro, the best-selling cigarette in the world, along with its other popular products. PM dividends have roughly doubled from 64 cents quarterly back in 2011 to $1.25 as of the beginning of this year, adding up to one of the best yields in the S&P 500 index.

Office real estate operator Vornado has a portfolio concentrated in the nation’s key metropolitan markets, including prime properties in New York City, Chicago and San Francisco. Vornado is also the leading firm when it comes to sustainable commercial properties, with over 23 million square feet of Leadership in Energy and Environmental Design, or LEED, certified buildings. Structured as a REIT, or real estate investment trust, VNO must deliver 90% of its taxable income back to shareholders each year – meaning a mandate for consistent and generous dividends for shareholders.

Another REIT, Simon differs from Vornado in that it is one of the largest mall owners in America. Its locations are focused on shopping, dining, entertainment and mixed-use destinations instead of commercial real estate high-rises. COVID-19 was naturally quite tough on Simon; however, the recovering economy and the decline of social distancing restrictions has allowed SPG to get back on track. Shares have more than doubled from this time two years ago, and Simon just gave dividend investors a lot more to like with a big boost of almost 27% in its payout this year.

Old-school tech giant IBM isn’t often included in the same conversations as dynamic and younger firms like Amazon.com Inc. (AMZN) or Google parent Alphabet Inc. (GOOG, GOOGL). However, “Big Blue” still has a lot to offer. Its deep enterprise technology relationships in software, consulting and IT infrastructure make the company tremendously profitable. Though the company forecast earnings per share north of $10.50 next fiscal year, dividends currently only add up to $6.56 annually. That means the generous dividends aren’t just sustainable but ripe for future increases down the road, even if earnings don’t grow at the outsized rates you’ll find at more ambitious Silicon Valley firms.

Big Oil companies have gotten a lot of attention this year, but integrated energy giants that have risen along with crude oil are not as generous with their dividends as smaller and more focused players like Oneok. OKE is a play on the “midstream” portion of the energy business alone, which involves transportation and storage and is not exposed to the risks of commodity price volatility. Oneok helps move natural gas around the U.S. and charges fees for that service, then passes a portion of that cash on to shareholders. Income investors will take comfort in this stable model, which supports strong cash flows regardless of the price of a barrel of oil in 2023 and beyond.

KMI is another energy infrastructure company operating across North America, with a network of natural gas and crude oil pipelines, as well as storage and processing facilities. All told, the stock owns roughly 83,000 miles of pipelines and almost 150 terminals and is valued at nearly $45 billion. With a scale like that, alongside a midstream focus that insulates it from the ups and downs in oil and gas prices, it should be no surprise that KMI is one of the most reliable income plays in the S&P 500 right now.

You may see AT&T stock in some screening tools with a higher yield, but keep in mind that is based on previous payouts before a recent spinoff of Warner Bros. Discovery Inc. (WBD) that reduced both the market value of parent AT&T along with its dividend potential. However, a new dividend run-rate of about 28 cents per share quarterly annualizes to a yield that is more than four times the typical S&P 500 component. And furthermore, the spinoff helps management focus on the core business of this long-standing telecom leader. Shares have rallied strongly since March as Wall Street has looked ahead to life after the split, and with a big-time payout there’s reason to think this run could continue in 2022.

The $100 billion tobacco icon Altria is behind some of the biggest brands in North America, including its flagship Marlboro cigarettes, Black & Mild cigars and smokeless tobacco products including Copenhagen and Skoal. Yes, the health risks of these tobacco products are real. But that doesn’t stop millions of customers from buying Altria products despite this. And with the company increasingly looking beyond this core revenue stream to cannabis-related goods and vaping products, there’s a good chance this “sin stock” will see consistent profits and generous dividends for the foreseeable future regardless of whatever morality you assign to its business model.

Lumen is a telecommunications company offering voice and data connections, along with related services including cloud solutions and cybersecurity add-ons. CenturyLink rebranded itself Lumen Technologies a few years ago, in the wake of a series of big-time acquisitions including the purchase of Level 3 Communications for about $25 billion, but despite that big price tag the current LUMN stock valuation is only about $12 billion or so. There are challenges for this second-tier telecom, including its large debt load from those previous deals. However, income investors who don’t mind the risk may be interested in the big-time yield of this top S&P dividend stock as a hedge against potentially lackluster share performance.

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Crude Oil Price Forecast Slam Into the Top of a Triangle

WTI Crude Oil Technical Analysis

The West Texas Intermediate Crude Oil market rallied significantly during the trading session on Friday to reach the $110 level. The downtrend line, of course, comes into the picture and offers a lot of selling pressure. If we can break above the highs of the last couple of weeks, the market is likely to continue going higher, perhaps reaching the $120 level. Alternately, if we could see this market turn around and fall back to the 50 Day EMA.

Trading Derivatives carries a high level of risk to your capital and you should only trade with money you can afford to lose. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary.

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It will be interesting to see how this plays out but pay close attention to those highs that we are approaching because that will be key to telling you where we are going in the short term. Longer-term, it almost certainly looks as if oil will at least try to go higher.

Brent Crude Oil Technical Analysis

Brent markets also have slammed into the top of a triangle, showing signs of trying to break out as well. Ultimately, this is a market that I think given enough time will probably pull back into the triangle, but I believe that the 50 Day EMA should come into the picture for support, as well as the uptrend line of the triangle.

At this point, the market continues to show a lot of volatility, and I think that given enough time we will more than likely will find a “buy on the dip” type of situation. The market will continue to pay close attention to these trendlines and make a bigger move once we finally break out. At this point, it certainly looks as if the buyers have much more momentum than anything else.

Oil Price Forecast 2025 to 2050

The EIA predicts that by 2025 Brent crude oil’s nominal price will rise to $66/b. By 2030, world demand is seen driving Brent prices to $89/b. By 2040, prices are projected to be $132/b. By then, the cheap oil sources will have been exhausted, making it more expensive to extract oil. By 2050, oil prices could be $185/b.

WTI per barrel price is expected to rise to $64 per barrel by 2025, increasing to $86 by 2030, $128 by 2040, and $178 by 2050.The EIA assumes that demand for petroleum flattens out as utilities rely more on natural gas and renewable energy. It also assumes the economy grows around 1.9% annually, while energy consumption decreases by 0.4% a year.

The Russian Invasion of Ukraine

Russia is the third-largest producer of liquid fuels and petroleum, so when the country invaded Ukraine in late February 2022, it had immediate impact on Brent crude oil futures prices. As the conflict continued, the prices of crude oil settled in out on an upward trajectory, reaching nearly $130/b in early March, and staying well above $100/b into April.

US Oil Supply

The coronavirus pandemic and natural events are still affecting oil demand and supply. The U.S. experienced a drop in production following Hurricane Ida in September as the storm shut at least nine refineries.

The EIA estimates that U.S. crude oil production will average 12.01 million b/d in 2022 and 12.95 million b/d in 2023.11

Diminished OPEC Output

Oil price increases also reflect supply limitations by the Organization of the Petroleum Exporting Countries (OPEC) and OPEC partner countries. In 2020, OPEC cut oil production due to decreased demand during the pandemic. It gradually increased oil output through 2021 and into 2022. Supply chain disruptions in late 2021 affected global trade as well.

At its most recent meeting in December 2021, OPEC stated it would continue to gradually adjust oil production upward by 0.4 million barrels per day (mb/d) in January 2022.

Natural Gas

Countries in Asia have relied on coal to generate power, but recent shortages have turned them to natural gas. Higher temperatures in parts of Asia and Europe have led to high demand for natural gas to generate power.

COVID-19 has hampered Europe’s natural gas production, and a colder-than-expected heating season in early 2021 reduced supplies further.

As a result, natural gas prices soared in 2021 and are expected to remain high in 2022, and affected countries have turned to gas-to-oil switching to reduce power generation costs.

Global Inventory Draw

As a reduction in oil production continues globally, countries are forced to draw from their stored reserves (not including the strategic petroleum reserves). This steady draw of oil is contributing to the increase in prices, because inventories are decreasing.

By: Christopher Lewis

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Oil Prices Slip After China Cuts Import Quotas

Oil prices eased on Thursday after the world’s top importer China cut the first batch of crude import allocations for 2022, offsetting the impact of U.S. data showing fuel demand had held up despite soaring Omicron coronavirus infections.

Brent crude futures fell 27 cents, or 0.3%, to $78.96 a barrel at 1322 GMT. U.S. West Texas Intermediate (WTI) crude futures slid 36 cents, or 0.5%, to $76.20 a barrel after six straight sessions of gains. Oil prices pared earlier gains after China, the world’s top crude importer, lowered the first batch of 2022 import quotas to mostly independent refiners by 11%.

“Market sentiment weakened on worries that the Chinese government could take stricter actions against the teapots,” a Singapore-based analyst said, referring to the independent refiners.

Global oil prices have rebounded by between 50% and 60% in 2021 as fuel demand roared back to near pre-pandemic levels and deep production cuts by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) for most of the year erased a supply glut. read more

U.S. Energy Information Administration data on Wednesday showed crude oil inventories fell by 3.6 million barrels in the week to Dec. 24, which was more than analysts polled by Reuters had expected. Gasoline and distillate inventories also fell, versus analysts’ forecasts for builds, indicating demand remained strong despite record COVID-19 cases in the United States.

Oil prices also drew support from steps taken by governments to limit the impact of record high COVID-19 cases on economic growth, such as easing testing rules. read more

OPEC+ will meet on Jan. 4 to decide whether to continue increasing output in February. Saudi Arabia’s King Salman said on Wednesday the OPEC+ production agreement was needed for oil market stability and that producers must comply with the pact. read more

Iraq said it would support sticking to existing OPEC+ policies to raise output by a combined 400,000 bpd in February. Shell said it had resumed exports of Forcados oil in Nigeria, easing one of three major global outages which also include Ecuador and Libya. read more

Crude futures slipped on Monday as concerns over slowing global growth outweighed the prospect of tightening supply after talks among key producers to raise output in coming months stalled.

Brent crude for September fell 0.52% to settle at $75.16 per barrel while U.S. West Texas Intermediate crude for August settled at $74.10 a barrel, for a loss of 0.62%.

Both benchmarks fell around 1% last week but still hover near highs last reached in October 2018.

The spread of coronavirus variants and unequal access to vaccines threaten the global economic recovery, finance chiefs of the G20 large economies warned on Saturday.

A Reuters tally of new COVID-19 infections shows them rising in 69 countries, with the daily rate pointing upwards since late-June and now hitting 478,000.

“The market has been a bit negative as of late amid the growing sense that the latest OPEC+ impasse could be a precursor to a pump-and-grab scenario, meaning a lot more oil potentially gets put on the market,” said Stephen Brennock of oil broker PVM.

Oil prices slumped last Tuesday after the Organization of the Petroleum Exporting Countries and their allies, a group known as OPEC+, did not reach an agreement to increase output from August. This was because the United Arab Emirates rejected a proposed eight-month extension to OPEC+ output curbs.

The world’s top oil exporter Saudi Arabia met full contractual demand for crude oil from five buyers in August, but turned down at least two requests for additional volumes.

Front-month WTI crude futures posted their sixth weekly gain last week after a bullish report from the U.S. Energy Information Administration showed U.S. crude and gasoline stocks fell while gasoline demand reached its highest since 2019.

In response to higher oil prices, U.S. energy firms added oil and natural gas rigs for a second week in a row, data from Baker Hughes showed.

By : Dmitry Zhdannikov, Sonali Paul and Florence Tan

Source: Oil prices slip after China cuts import quotas | Reuters


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