Daily Energy Report
China rebuilding its SPR, US inventories NOT bullish, Houthis make more Red Sea threats, Russia LNG difficulties and US benefit, OPEC+ cushion, EU nations float windfall tax, and more.
Note: Oil prices have been increasing in recent days and Brent exceeded $77/b this morning. While rumors of Israel attacking Iran’s oil facilities have contributed to it, we believe that market participants have concluded that the bearish stories out of Bloomberg, the Financial Times, and WSJ are not credible and OPEC+ is serious about balancing the market. As for the Israeli attack on Iranian oil facilities, see discussion in the report below.
Last week we mentioned than a price floor has formed. Recent developments prove our point. We believe the worst is over unless we end with a recession or price war.
Chart of the Day: China is Rebuilding its SPR!
Summary
Figure (1) shows trends in China’s strategic petroleum reserves (SPR) as estimated by the tracking firm Kpler. It shoes that as oil prices declined in recent weeks, China started rebuilding its SPR. While the chart shows releases and rebuilds at certain times of the year, we believe the recent rebuild is different as explained below.