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Breaking News:

Gasoline Draw Sends Oil Prices Higher

Market Shrugs Off Biden's Readiness To Tackle Oil Price Rally

Crude oil prices dipped this week after the White House said there were still tools on the table to address the rising prices of the commodity but quickly regained ground in the latest sign that there are a lot more powerful factors at play when it comes to oil prices.

"We continue to work with producer and consumer countries and these steps have had real effects on prices and ultimately tools continue to remain on the table for us to address prices," Emily Horne said earlier this week, adding "We will continue to monitor prices in the context of global economic growth and engage our OPEC+ partners, as appropriate." 

This caused a dip in prices, per Bloomberg, after West Texas Intermediate closed at the highest in seven years on Tuesday. Yet the White House statement was not the only reason for the dip. It came on the day that the American Petroleum Institute reported yet another weekly build in gasoline stocks.

The Energy Information Administration is reporting its own inventory estimates in oil and fuels today. For the previous two weeks, the administration estimated hefty gasoline builds as well, totaling over 18 million barrels.

Stronger than expected demand for oil has pushed prices some 30 percent higher over the last couple of months, and there is further to go, according to analysts who are emphasizing OPEC's dwindling spare production capacity and Russia's apparent struggle to boost crude production in line with its OPEC+ quota.

On the bearish side, the EIA reported earlier this week that crude oil production in the Permian had hit a record in December and would continue to grow this month and next, reaching 5.076 million bpd in February. Total shale oil output was seen rising to 8.54 million barrels daily in February.

This, however, may not be enough to quench supply concerns that are fueling the bullish sentiment. At the time of writing, Brent crude was trading over $88 per barrel, and WTI was changing hands at over $87 a barrel.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on January 20 2022 said:
    The United States can't swim against the oil tide and whatever tools it has are toothless.

    The global oil market shrugged off the White House’s statement that there were still tools on the table to address the rising prices exactly as it totally ignored the Biden Administration’s announcement that it is releasing 50 million barrels from the US Strategic Petroleum Reserve (SPR) to help reduce prices.

    The other failed tool was to call on OPEC+ to increase its production beyond the already agreed 400,000 barrels a day (b/d) a month. But OPEC+ rejected these calls and stuck to its agreed production policies.

    There are two last tools in the United States’ arsenal. One is to sue OPEC+ under the No Oil Producing and Exporting Cartels (NOPEC) Act of 2021 and the other is to send the Navy.

    However, OPEC shouldn’t be unduly worried about the NOPEC bill first because it isn’t a cartel and second because NOPEC has only jurisdiction in the United States but no extraterritorial jurisdiction under international law. So all OPEC+ has to do is terminate all its crude oil exports to the United States. In my opinion, NOPEC is more of a hot air than an effective tool.

    Sending the Navy as a last resort has been threatened in the past and found wanting and where the United States did go for it like the invasion of Iraq, it lost the war. The real winners were China and Iran.

    Going down memory lane to the days when Saudi-led Arab oil producers imposed an oil embargo against the United States for its support of Israel during the 1973 Arab-war, Henry Kissinger told the late Saudi King Faisal "If Saudi Arabia does not lift the boycott, America will come and bomb the oilfields." King Faisal replied back "You are the ones who can't live without oil. You know, we come from the desert, and our ancestors lived on dates and camel’s milk and we can easily go back and live like that again.

    Henry Kissinger said in his memoirs that when he met King Faisal in Jeddah the king was sad, so he told a joke to King Faisal, "My plane ran out of oil so will your majesty order it to get supplied with oil and we are ready to pay at international rates?" King Faisal said to Kissinger, "And I’m an old man who wishes to pray in Al-Aqsa Mosque in Jerusalem before I die so will you help me in my wish?" At dinner Faisal remarked to Kissinger, "You must have noticed, nothing in this dinner tonight carries foreign mark. The meat on the table comes from locally hunted camels. The delicacies all made on Arab land, from Arab resources. The lamps that give us light tonight burn on fuel extracted from camel fat. If you dare come here, we would set our wells on fire and wander into the deserts. We, as you see, would survive. What would you do?

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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