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Oil Prices Are Leading The Energy Complex Higher This Morning, After Weeks Of Diesel Prices Leading That Charge

Wednesday, Mar 23 2022
Market Talk

Oil prices are leading the energy complex higher this morning, after weeks of diesel prices leading that charge, following a disruption at a major oil port and another weekly inventory decline.

It’s not just the war that’s hampering oil supplies, as one of the largest pipeline networks that moves more than 1 million barrels/day through Russia was damaged by storms on the Black Sea and may take months to repair. That crude transported by that system (CPC) was exempt from US sanctions as it was predominantly of Kazakh origin, but was also seen as a potential loophole to allow Russian crude to reach foreign buyers because those certificates of origin could be falsified. It’s also expected that Russia will use this as another leverage point, as it controls the timeline of the repairs to the port. 

The Dallas FED published a study on the Russian Oil Supply Shock Tuesday, noting several factors that are preventing their oil from reaching the market even without official sanctions, and why a global recession is likely if this persists. A Bloomberg note this morning seems to contradict that idea, noting how millions of barrels of Russian oil are still managing to find their way to the market, even though it’s much more difficult than before.

Chevron meanwhile has made a push to lift sanctions on Venezuelan oil, pledging that it can double the country’s output in just a few months if it’s allowed to resume operations. After sitting on the sidelines for years as its operations were idled, the oil major may have just played the strongest hand of all, offering to help lower gasoline prices in an election year.

The API reported inventory draws across the board last week, with small decreases in both gasoline and diesel of less than 1 million barrels each, while crude oil stocks drew by nearly 4.3 million barrels, which adds another reason for crude prices to outpace products today. The DOE’s weekly report is due out at its normal time this morning.  

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