White House to Release Oil
In an attempt to lower gasoline prices, the White House announced the largest oil liquidation ever from the U.S. Strategic Petroleum Reserve. President Biden intends to drive gasoline and diesel prices lower following months of rising prices with his million barrels per day release. The higher prices are due to Russia’s war on Ukraine and the sudden threat to oil supplies. The release, expected to last six months, could total 180 million barrels, most of which will be refined into unleaded gas for use in automobiles. The International Energy Agency has pledged to join the U.S. in selling from oil reserves. Daily global crude oil consumption is roughly 100 million barrels, so the stockpile release can only provide a small portion of our energy needs.
The administration continues to take other measures to stimulate energy production and, in the case of liquefied natural gas, export more to Europe since they’re suffering from a dramatic shortage. Their hope for gas supplies through the Nord Stream Pipeline has vanished with the war. President Biden is facing record domestic rises in fuel costs, emergency needs, and obligations to help solve shortages facing our European allies, and the longer-term commitment to reduce fossil fuel emissions causing climate change. Solar, wind, and nuclear power providers are urging conversion of production from those sectors, while our agricultural community is calling for greater use of ethanol (made from corn) and other biofuels.
As of midday Friday, May crude was trading at $99.50, down about $13.00 per barrel on the week, while May unleaded gasoline went for $3.14 per gallon, a decrease of roughly 28 cents. Natural gas for May delivery brought $5.75 per million BTU’s.
Crop Report Sends Corn Popping, Beans Dropping
Thursday’s USDA crop report indicated a considerable increase in planted soybean acres, but acres dedicated to corn were way below estimates. U.S. farmers are adjusting to higher fertilizer costs by switching from planting corn to planting beans. Corn requires expensive fertilizer made from natural gas, while beans naturally produce nitrogen-fixing rhizomes and require far fewer input costs.
By week’s end, corn for December delivery was at $6.87, up 25 cents on the week, whereas May beans were down over a dollar per bushel at $15.82. Wheat, paying more attention to supply and demand factors due to Ukraine, was less volatile this week. May wheat sold at $9.83 per bushel, down $1.15 this week.
Opinions are solely the writer’s. Walt Breitinger is a commodity futures broker in Valparaiso, Ind. He can be reached at (800) 411-3888 or www.indianafutures.com. This is not a solicitation of any order to buy or sell any market.