Signing Off For The Night -- January 23, 2019

I'm done blogging for the day. I'm burned out. It doesn't happen often that I feel burned out but this is one of those nights. I don't know why. It just feels like I hit a brick wall.

Two things before I sign off for the night.

First, this graphic from twitter today.

Second, we may be entering a period in which things become very confusing to Americans. It is very possible that the glut of WTI will continue, dropping the price of WTI.

Americans will see that headline that there is a glut of oil, but they will see the price of gasoline rising.

Due to world events, the refiners are now desperately trying to source heavy oil to balance all that light oil for their refineries optimized for heavy oil. Refiners will be forced increase the price of their refined product as heavy oil becomes more expensive, and yet there will be that glut of WTI.

Obviously there are many, many other story lines but that certainly seems most plausible.

If that comes to pass, we can all thank President Obama for killing the Keystone XL which would have completely prevented this problem -- the Keystone XL was designed to bring heavy oil from Canada to the Gulf Coast.

Having said that, Canada currently has a curb on heavy sands production. I assume that the curb will be lifted soon and we will start to see increased CBR from Canada. It should be noted that despite the Keystone XL being killed, the Canadians seemed to be able to ship all the oil they produced via rail so the death of the Keystone XL may not be that big a factor.

The desperate need for heavy oil also puts Saudi Arabia back in the catbird seat, as they say. I'm not sure if Saudi oil is as good as that from Venezuela or Canada but it's heavier than WTI. So we'll see.

All things being equal, I see WTI falling in price (unless it follows the overall oil market and rises with "heavy oil") and gasoline becoming more expensive.

Complicating things, the refiners will soon go into their switch from winter blends to summer blends (always increases the price of gasoline). And, then we anticipate the driving season. All in all, I suspect WTI will struggle and remain in the $45 to $55 range; Brent will increase; and gasoline prices will rise significantly.

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