Uncertainty in Today’s Energy Market
Nov 02, 2022
As I look around each day, I see more changes happening in our world. Things are changing at such a rapid pace that it is hard to adapt and overcome. With all these changes happening, it is affecting our everyday lives in so many ways; from the food we eat, to the clothes we wear, the vehicles we drive, even to the places we call home. With all these new things happening there is uncertainty in every decision we make: is it the right decision? Should I do that differently? What will work the best for me? How is that going to affect my personal life? These are all questions we face every day. With so much going on in the world, we sometimes don’t think it will affect us because we don’t live there. However, it all has some effect on our lives in one way or another, maybe not directly but indirectly it does! That is what is happening in our markets today; OPEC+ cutting production effects our markets, the Russia/Ukraine War effects our markets, Covid-19 in China effects our markets and so many other things as well. Let’s look specifically at what all these changes are doing to our fuel markets.
OPEC+ cutting production by 2 million barrels a day has had an impact on crude price, with supply being short it causes price to stay higher on crude oil. They are seeking higher prices now in the case that a global recession reduces demand later. This cut could influence the price at the pump causing the prices to jump as much as 30 cents per gallon in the next several months. OPEC stated the decision to cut production was due to “uncertainty that surrounds the global economic and oil outlook market.”
The war between Russia and Ukraine has affected the oil market by causing a sharp hike in energy prices in the EU and worldwide. The invasion of Ukraine has slowed global growth and caused inflation to rise worldwide. Besides raising the likelihood of market volatility, the war and sanctions are disrupting exports of oil and natural gas from Russia and Ukraine. Russia was a large exporter of fuel to the EU, but with sanctions being imposed on Russia for oil exports, the EU is being forced to find oil from other countries causing hardships with the winter season coming soon. In turn, this has caused the United States and others to export to them, which is affecting our current fuel supply and reserves.
Crude futures fell this week, weighed down by data showing an economic slowdown in China due to its strict Covid-19 lockdowns. China’s October purchasing managers’ index fell unexpectedly, which could indicate the negative impact of China’s strict Covid-19 policy as well as slower global economy. Now, a couple days later, the Wall Street Journal reported that Hong Kong stocks appeared to be rallying after an anonymous post on Chinese social media suggested that the government may intend to soften restrictions beginning in March. Other outlets also reported on the rumor. China’s Covid restrictions have been seen as a lid on oil prices, limiting demand for crude from one of the world’s largest energy consumers.
With all this going on, it makes it very hard to predict what is going to happen next. Supply is very tight and that is keeping the market up, but all these other things can make it move in ways never seen before. As customers there has never been a better time to work with your CVA Energy team on fuel contract pricing as well as when the right time to buy is; we can’t predict the future but can advise when might be a good time to lock in some fuel for your operations. Give your local CVA Energy Salesman a call for all your needs and concerns. Let us help you!