Very little price change has occurred with crude oil prices on Presidents’ Day after OPEC + has not yet decided to impose further production cuts to offset demand concerns caused by the coronavirus outbreak.
Qassem Soleimani, the head of Iran's elite Quds military force and one of the most powerful figures in the Islamic Republic, was killed Thursday night in an airstrike in Baghdad, the U.S. Defense Department confirmed. The death of such a powerful figure in the Iranian landscape raises questions about instability in a region which supplies about 25 percent of the world’s oil. Brent Oil, the international benchmark of crude, surged to nearly $70 a barrel (an increase of 4 percent) whereas West Texas Intermediate, the American oil benchmark for crude, also rose about 4 percent, to nearly $64 a barrel. This is the largest price increase since the attack on a major Saudi oil processing plant back in September.
As the end of this week winds down and people prepare for the holidays next week, light liquidity will most likely be the name of the game in our energy markets. Light liquidity means trading volume is lower than normal which is to be expected during this time of year. Therefore, the bid/ask spreads are wider. Meaning that if the computer-driven trading houses decide to either buy or sell a lot of volume, the market can move violently in one direction rather quickly. What does this mean for our industry? This means that our customers can be very opportunistic especially if we see a retracement in prices after this rally we’ve seen since the beginning of December.
According to a global energy industry forecast, oil growth will continue to soar until the 2030’s and climate-damaging emissions will keep climbing until at least 2040. The World Energy Outlook is not only closely watched by the oil industry but also the governments due to its relevance to climate policy. The International Energy Agency said that almost 20% of the growth in last year’s global energy use was “due to hotter summers pushing up demand for cooling and cold snaps leading to higher heating needs.” The Internation Energy Agency (IEA) forecast global oil demand to be 106.4 million barrels per day by 2040 (up from 96.9 million last year).
Big Corn and Big Oil have been dueling over the future of the Renewable Fuels Standard, which requires oil refiners to mix biofuels like corn-heavy ethanol into their fuel. The Renewable Fuel Standard requires refineries to blend increasing volumes of biofuels into their fuel each year. The proposed plan would include an increase to biofuels requirements for 2020 of 1 billion gallons (3.8 billion liters) and the agricultural industry wants the administration to force larger refineries to make up for the exempted gallons through reallocation. The proposed plan, discusses 500 million gallons for conventional biofuels and 500 million gallons for advanced biofuels (like biodiesel).