12.29.2022 Energy

Per this week’s Energy Information Agency (EIA) inventory report we saw a small build of crude oil versus an expected draw, diesel fuel itself showed a small product build going against an anticipated draw and gasoline came in with an unseasonable significant draw when it was expected to build. Propane reportedly had a decent draw, no surprise with the recent cold weather experienced across a fair share of the Nation. Domestic propane inventories are still approximately 20 million barrels above last year at this time while crude, diesel, and gasoline are nearly even with the same time period in 2021. Production of essentially all Energy products is in a nice place, at the start of 2022 there were about 480 crude oil drilling rigs operating domestically, at the moment that number stands at 622. Also positive consumer news is the fact that a few major oil companies including Chevron and ExxonMobil have decided to increase capital spending which equates to steady if not more crude production. To summarize all of these details, we are currently in a nice pricing zone, yet the potential for lower pricing needs to be acknowledged as we transition into 2023. Two factors that can change this scenario in a moment’s notice are China and there covid handling, recently China lifted most restrictions which caused Energy prices to rise, as of today it’s reported cases to be climbing which triggers demand fears causing the crude price to again head lower. The other factor which I mention often is Hedge Fund buyers of crude oil, at the moment these buyers do not have a significant position in crude, this will change so we need to watch closely as we position for 2023 and beyond.
Happy New Year to all!
 
Thank you,
Bill Pelzel