First, let’s begin with some thoughts from Flashpoint’s Darius Lechtenberger who touches on a popular topic right now, as why the US imports some oil from foreign nations when it has shown that it can be a net energy importer/exporter, which is also what some people refer to as the US being ‘energy independent’:

“WTI crude oil and refined product prices have retreated from the highs that were established Sunday evening when trading for the week opened. WTI hit $130.50 a barrel. Crude is now trading at $118. Gasoline and distillates are also both off their highs as well, but still up significantly. The West appears to be inching closer to putting sanctions on Russian crude oil as the Chinese have reaffirmed to the world that Russia is its most important ally and will continue with “normal” trade activities with Russia. It may be surprising that the U.S. imports any Russian oil at all, given the U.S’s capabilities to produce crude oil. It’s because the vast majority of U.S. crude oil is light, sweet oil, meaning it’s low in sulfur content and density. Russia’s flagship oil grade Urals is rich in sulfur, something U.S. refiners are particularly well designed to handle. Most of the denser, high-sulfur crude the U.S. needs comes from its closest neighbors: Mexico and Canada. Venezuela use to be a solid supplier of the heavy, sour crude to the U.S., but regime change and an incredible amount of mismanagement of their crude oil production have decreased their production levels by nearly 50%. When the U.S. does import Russian oil, it tends to flow toward the refiners located on the East Coast and West Coast, located far away from the heart of the oil and gas hub in the Gulf Coast region. Refiners on either ends of the country rely more on imports to satisfy their crude needs because pipeline connections from the production hubs in Texas and North Dakota to the coasts are limited. Additionally, the Jones Act requires U.S.-flagged vessels move shipments between U.S. ports, limiting the ability to ship American-pumped crude to cities along the coasts.”

Some of you were likely aware of these things. Prior to the COVID lockdowns, it was a popular refrain to hear that the United States was energy independent. It would be more accurate to say that the US was export/import neutral, for the reasons that Darius described above. Unless and until US refiners can live without sulfur rich crude oil, we’ll likely be importing some of our oil.

Natural gas values in Europe jumped over 40% this morning…which is simply astonishing. Simply put, much of what we are seeing right now relative to energy price volatility is astonishing. Propane near term values are also much higher today than they were on Friday, with Conway and TET deals being done north of $1.60 and TET closer to $1.70.

I have been either writing about the energy markets or talking about them since 1996. There have been dozens of times where I have written about ‘possible’ wars in the Middle East, or other areas where some incursions were adding a ‘conflict premium’ to energy values…but those things came and went rather quickly. However, what is taking place in Ukraine relative to Russia’s unlawful invasion is absolutely one for the history books, unseen for 80 or so years. I just hope that it’s not the final chapter.