by Michael Snyder, themostimportantnews.com
Since war with Iran erupted in February, the world has been using a lot more oil than it has been producing. The good news is that we had a tremendous amount of extra oil sitting around. As a result, we have been able to avoid shortages and we have been able to serve as the supplier of last resort for nations all over the globe. The bad news is that our commercial oil inventories are now almost entirely depleted, and the U.S. Strategic Petroleum Reserve is being drained very rapidly. We will soon hit a wall, and when that happens the global energy crisis will start getting really crazy.
According to the International Energy Agency, the amount of oil being produced globally each day is falling faster than they originally projected…
Global oil supply will fall by ~4% and oil demand is set for a deeper contraction this year, as renewed hostilities in the Middle East push up fuel prices and weigh on consumption, the International Energy Agency said in its monthly oil market report on Wednesday.
The Paris-based agency sees global oil supply falling by 4.3M bbl/day this year, compared with the 3.7M bbl/day forecast in the IEA ’s July report, which would take total supply to the IEA ’s lowest forecast yet for this year at 102M bbl/day.
At this stage, global demand for oil is well above global supply.
In fact, the International Energy Agency is now expecting the world to run an oil deficit of approximately 1.8 million barrels a day during the third quarter of this year. That is “more than double its previous estimate”…
The result would put global oil supply ~1.27M bbl/day below demand this year, widening from an 860K bbl/day deficit implied from the IEA’s July forecasts.
“Global oil supply has fallen well below demand due to the Strait of Hormuz shutdown, the U.S. blockade of Iranian exports, attacks within the Bab el-Mandeb Strait and reduced Kazakh CPC Blend exports,” the IEA said.
For Q3, the IEA expects the global oil market to run a deficit of 1.8M bbl/day, more than double its previous estimate of ~800K bbl/day and the deepest quarterly deficit since Q4 2021.
I realize that there is a lot of technical jargon there, and so let me try to break this down very simply.
Things are a lot worse than they thought they would be.
Now our commercial oil inventories have almost disappeared and the U.S. Strategic Petroleum Reserve has fallen under 300 million barrels for the first time since early 1983…
Crude oil stockpiles in the U.S. Strategic Petroleum Reserve have fallen below 300 million barrels, the lowest level in more than four decades, as global inventories stay under pressure due to the Iran war.
The SPR fell by 6.1 million barrels to 298.7 million barrels last week, according to data released by the Department of Energy on Monday. The reserve, created in 1975, is at its lowest level since January 1983.
Of course we will not be able to use all of that oil.
There is a certain level that we cannot go below, and apparently more than 25 percent of the oil is “physically inaccessible” for various reasons…
More than a quarter of that oil is physically inaccessible, blocked by failing pumps, corroded pipes, and underground salt caverns that have deformed beyond their operational parameters, according to internal government documents reviewed by Sputnik.
The finding means the actual emergency capacity of the American energy backstop is smaller, and slower to deploy, than any headline barrel count conveys.
We are being told that we have about 40 days left.
What will we do after that?
Already, diesel prices are starting to go through the roof…
U.S. and European diesel prices rose sharply on Monday after attacks on refineries in Russia and Saudi Arabia added to supply disruptions, raising concerns for farmers in need of the fuel for the planting season in the Northern Hemisphere and harvesting season in the Southern Hemisphere.
The U.S. ultra-low sulfur diesel futures contract rose 7.4% to settle at $4.19 a gallon on Monday, the biggest gains since July 13. European diesel refining margins, measured as the difference between the price of fuel and the cost of crude oil, rose nearly 10%.
The surge followed confirmation of an attack by Ukraine on a refinery in Russia’s Tatarstan region and another attack by Yemen’s Houthis on the Jazan refinery in Saudi Arabia. The Jazan refinery has been shut since July 27 due to an earlier strike by the Houthis, and plans to restart it have been postponed from August 15 to August 30, according to industry monitor IIR Energy.
It is just a matter of time before we see diesel shortages start to pop up all over the world.
This will greatly affect farmers and truckers.
What we really need is for the conflict in the Middle East to end and for traffic to start flowing through the Strait of Hormuz like it did before the war.
But that is not going to happen because there isn’t going to be a deal