Displaying items by tag: gas

Gasoline prices in the U.S. are projected to drop below $3 per gallon for the first time in over three years, offering relief to consumers grappling with inflation. Lower fuel costs are a positive sign for Vice President Kamala Harris and the Democrats as they head into the presidential election season.

 Analysts attribute the price decline to weaker fuel demand and falling oil prices, with national averages already decreasing from a year ago. Patrick De Haan from GasBuddy suggests prices will continue to fall as winter-grade fuels become available. 

Studies indicate that presidential approval ratings are often tied to gas prices, making this drop a potential boost for Harris’s campaign. However, global oil dynamics and events like Hurricane Francine could still impact prices.

Finsum: Inflation is still an ongoing issue heading into the election and gas prices are the center of the target.

China has firmly established itself as the third-largest gas market globally, trailing only the US and Russia, and surpassing the EU. As China’s gas demand grows, suppliers see it as increasingly significant compared to the declining European market. 

The EU’s dependency on foreign gas producers, with its push towards biogas and biomethane falling short, complicates its supply security. Despite EU's efforts, its domestic gas production continues to decline, increasing its reliance on imports, with spot LNG providing critical equilibrium between Asia and Europe. 

Europe faces high gas prices and volatility due to limited global production capacity and logistical constraints. Recent geopolitical events and sanctions, including Uniper’s termination of Russian gas contracts and the EU's 14th sanction package against Russia, further challenge Europe's gas supply dynamics.

Finsum: Natural gas will definitely see policy volatility due to the upcoming election, but for the meantime China is keeping demand high. 

Lower energy prices have provided some relief for consumers over the last few months. However, this could be changing with demand set to increase as we enter the start of driving season which is due to be exacerbated by refinery outages in many parts of the country.

Over the last month, gasoline prices are about 5% higher but still slightly down relative to last year at this point. Higher energy prices negatively impact consumer confidence and discretionary spending but also feed into inflationary pressures. In last month’s CPI report, higher energy prices was a major factor in the hotter than expected readings. Additionally, they have political implications given elections in November.

According to analysts, the situation is likely to get worse before its gets better. Gasoline inventories are lower than normal, following a 5.7 million barrels decline last week, and are now 3% below their average levels for this time of the year. Inventories could continue to be drained as refineries have been running below 87% capacity for the last 8 weeks. Adding to these issues is recent drone strikes on Russian refineries by Ukraine.

Finsum: Gasoline prices have been rising due to refinery issues. The situation is likely to get worse before it gets better as we enter summer driving season, and inventories have been drawn down more than expected. 

On March 15th, the International Energy Agency raised its estimate for global oil demand in 2023 by another 100,000 b/d as rebounding air traffic and pent-up Chinese demand push consumption to record highs. In its latest monthly oil report, the energy watchdog said it now sees global oil demand averaging 102.02 million b/d in 2023. That’s 2 million b/d higher than in 2022. The IEA estimates that gains will accelerate over the year, rising to 2.6 million b/d year on year in the fourth quarter, from 710,000 b/d in the current quarter. In the report, IEA stated, "Global oil demand growth started 2023 with a whimper but is projected to end the year with a bang .... Rebounding jet fuel use and a resurgent China will see an overall Q1-Q4 ramp-up of 3.2 million b/d, the largest relative in-year increase since 2010 with oil use surging to 103.2 million b/d in second-half 2023." The agency attributes the rise in demand to China's economic momentum, with rebounding February Purchasing Managers' Index data and robust air traffic demand. The IEA said Chinese mobility mostly stabilized after January's "remarkable bounce." It also added that Chinese air traffic with domestic flights is now well above pre-pandemic levels. Due to this, the IEA raised its estimate for Chinese jet/kerosene demand by 60,000 b/d.

Finsum:In its recent monthly oil market report, the International Energy Agency raised its estimate for global oil demand this year by another 100,000 b/d as rebounding air traffic and pent-up Chinese demand push consumption to record highs.

While offshore oil drilling has been growing slowly in recent years, research firm Rystad Energy expects a surge in new spending over the next two years. Energy companies had previously been hesitant to commit to expensive new projects that can take years to pay off. But with oil and gas demand rising after the pandemic, some companies are now looking for projects that can offer reliable production in the longer term. According to Rystad Energy, the offshore oil and gas industry has $214 billion of new project investments lined up in the next two years, the highest two-year total in a decade. In fact, it will mark the first time since 2012-2013 that companies have spent this much to develop offshore projects. According to Rystad, “Offshore activity is expected to account for 68% of all sanctioned conventional hydrocarbons in 2023 and 2024, up from 40% between 2015-2018.” Middle Eastern producers will account for most of the growth, however, there are projects off several continents. For example, U.K. offshore spending is expected to rise 30% this year to $7 billion, while spending on Norwegian projects could increase 22% to $21 billion, according to Rystad. Plus, North America, Brazil, and Guyana are all seeing growth as well.

Finsum:According to research firm Rystad Energy, a surge in new spending for offshore oil drilling is expected over the next two years as companies look for projects that can offer reliable production in the longer term with oil and gas demand rising.