Peak Oil is You

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Page added on September 17, 2017

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Failure to launch

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Risk assets failed to launch even after North Korea fired a missile over the northern part of Japan and reports of a terror attack on a London subway or the “tube” in rush hour. Oil failed to launch after rejecting the August high and pulled back below that strong resistance upper Bollinger band. The oil price rejection of the upper end of that range could signal that oil is not ready to break-out yet with triple witching, oil option expiration and increased geopolitical tensions that could change. There are reports that dispute the myth of “peak oil demand” and we should see some increased volatility and market action as the day unfolds.

Terror on the tube. The terror attack in London is just unfolding. The New York Times reports that “An explosion on a London Underground train on Friday morning injured several commuters, sowed panic, disrupted service and drew a heavy response from police officers and emergency workers.” The London Daily Express reports that “Eye-witnesses said victims suffered facial injuries after a what appeared to be a homemade bomb in a Lidl exploded. One witness said there were “lots” of people injured after the explosion and a subsequent stampede.” Another said a “fireball flew down the carriage” during the Parsons Green terror attack. Prime Minister Theresa May has confirmed she will chair a meeting of the Government’s Cobra emergencies committee this afternoon at Downing Street. The attacker is now feared to be at large.” The good news is that early reports seem to suggest that no one was killed and global markets seem unfazed. The British pound, that was already soaring on strong signals from the Bank of England’s Gertjan Vlieghe and Mark Carney, is telling the markets that UK interest rates are going to be increased soon.

The Japanese yen seems unfazed even as North Korean missiles fly over Japan and gold is barely blipping on the news. We can barely get a bid on treasuries, so at this point, it seems the markets are unfazed by these external risks. Yet if UN sanctions can’t stop the North Korean leader Kim Jong-un from firing missiles, then what can stop this madman. We believe that increasing tensions with North Korea is bullish for oil. Not because North Korea is a major producer or consumer but because of the risks to oil routes and Asian oil refineries. Some say a total oil ban is bearish and will bring North Korea to it knees. The UN has already banned light condensate oil and cut imports of refined petroleum products to 2 million barrels a year and banned textile exports and increased inspections of ships that are believed to be carrying cargo that was in violation of sanctions. Yet would a total oil ban work?

North Korea would feel the pain of an oil ban and their economy would suffer and possibly crash. Many North Koreans could also freeze this winter. They would have to turn to their coal reserves to keep the lights on and furnaces running. The regime itself cares little for its own people as long as the fat cats and the even fatter King Jong-un can run crazy and happy.

Peak oil demand? Electric cars? Remember peak oil? Where demand would grow so fast and the world would soon run out of oil. The new myth is now peak oil demand where innovative technologies like electric cars and renewable fuels would make the internal combustion engine a thing of the past. Well maybe someday but not just yet. The U.S. Energy Information Administration’s latest International Energy Outlook 2017 (IEO2017) projects that world energy consumption will grow by 28% between 2015 and 2040. Most of this growth is expected to come from countries that are not in the Organization for Economic Cooperation and Development (OECD), and especially in countries where demand is driven by strong economic growth, particularly in Asia. Non-OECD Asia (which includes China and India) accounts for more than 60% of the world’s total increase in energy consumption from 2015 through 2040.

Through 2040, the IEO2017 projects increased world consumption of marketed energy from all fuel sources, except for coal demand, which is projected to remain essentially flat. Renewables are expected to be the fastest-growing energy source, with consumption increasing by an average 2.3% per year between 2015 and 2040. The world’s second fastest-growing source of energy is projected to be, nuclear power, with consumption increasing by 1.5% per year over that period.

Even though IEO2017 expects the non-fossil fuels (renewables and nuclear) to grow faster than fossil fuels, fossil fuels still account for more than three-quarters of world energy consumption through 2040. Natural gas, which has a lower carbon intensity than coal and petroleum, is the fastest-growing fossil fuel in the outlook, with global natural gas consumption increasing by 1.4% per year. The relatively high rate of natural gas consumption growth is attributed to abundant natural gas resources and rising production, including supplies of tight gas, shale gas, and coalbed methane.

Natural gas supply is getting too close to the five-year average storage number to give the market comfort as we head into a winter where we should see record demand. The EIA reported a +91 Bcf change in storage, bringing the total storage number to 3.311 Tcf. This compares to the +58 Bcf change last year and +63 Bcf change for the five-year average. With just 1 and change cushion over the five-year average, it is time to start locking in your winter needs before it is too late.

About the Author

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world’s leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at Learn even more on our website at


Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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