Welcome back to the 16th edition of Thirsty Thursday, an inventory report from RARE PETRO! What a wild month it has been with hurricanes, California recalls, and the general madness of this past year and a half. While I try not to write too much about myself in these articles, I observe the 21st of September as a holiday every year (do you remember?). By the time we release the next report, it will have come and gone, so without further ado, today’s cocktail: The Earth, Wind, and Fire!
If you drink enough of these, you are almost certain to not remember the 21st night of September. As always, it is never a good idea to drink alone, so send this report to a friend who will enjoy it. We post these every Thursday, so be sure to follow us on LinkedIn so that you always get a chance to read the best inventory report on the internet.
Normally a hurricane will leave areas like Louisiana refining less than the area is producing. Ida left the area with the inverse as refineries are restarting but idling as they wait to receive crude deliveries. It seems that this played a significant part in affecting inventory levels as the EIA predicted a 3.5 million barrel drawdown which is a bit higher than previous week’s predictions. The actual result was a 6.4 million barrel drawdown.
The API also predicted a higher than usual 3.9 drawdown. Their actual numbers revealed that they too undershot the actual 5.4 million barrel drawdown.
It is possible that refineries will continue to not receive crude for quite some time further straining the crude supply. Either way, this continues 2021’s general trend of drawdowns.
Because of growing shortages in crude and (especially) nature gas, the prices were pushed even higher over the past week.
While high commodity prices in energy may benefit the folks who read these inventory reports, China is busy looking for economic opportunities. They will be auctioning off 7.38 million barrels of their own crude. While lots of people will point out that this is an attempt to suppress commodity prices, we are a little bit skeptical. Remember, China spent most of 2020 buying record amounts of hydrocarbons. Sure, they used lots of these materials to assist in the construction of many new coal facilities and other infrastructure, but it is doubtful that they have a shortage of oil. This is just a classic “buy low sell high” scenario. While the rest of the world celebrated the death of oil and gas in 2020 and pushed for renewable tech, China understood that the commodity was undervalued and bought as much as it could. Now they have plenty of the stuff and are looking to make some quick cash.
Next on the chopping block is gasoline. If you remember last week, we saw a massive 7.2 million barrel drawdown. This week we witnessed a 1.9 million barrel drawdown further threatening a continued shortage.
Like we mentioned, we are experiencing shortages of many commodities. Sure, average gasoline prices are up a cent from last week, but that might be the least of your worries this winter. Natural gas prices are climbing because the summer was unusually hot. This means people turn up the AC which increases the demand for natural gas. Summer is usually a great time to store natural gas for the winter, but that just didn’t happen this year. Combine that with initiatives from utility companies to support green initiatives and smart meters, and customers will be paying out a lot of money.
A few weeks ago we made a joke about it being more efficient to literally burn money for energy output, and if things do get progressively worse, and economic fallout paired with the quickly devaluing dollar may make that a reality. Things would have to get really bad for that to be the case, but it seems someone has already done some back-of-the-envelope math should you be interested. Germany experienced this in the midst of WWI. The famous story is that a woman left a wheelbarrow full of money in front of a bakery for a moment as she had to tend to other business. When she returned to purchase the bread she found her money piled on the ground. Someone had stolen the wheelbarrow. Again, things will likely not get that bad in the US, and it really serves as more of an interesting thing to keep in the back of your mind.
This week distillates join propane in record negative territory, but the progression of time should bring these levels back to normal.
But that is all we have for you this Thursday. We hope you enjoyed your time and sent this report to someone else who may get a kick out of it. Again, follow us on LinkedIn and peruse the rest of our website for entertaining, engaging, and informative content. Thank you for your time, and cheers!
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