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MONDAY EDITION June 18th, 2018 |
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The Energy ReportPhil Flynnhttp://www.pricegroup.com/ pflynn@pricegroup.com The Energy Report 06/18/18 Tariffs, OPEC and Oil Getting Personal Oil prices got hit hard as the trade war for oil traders got personal. In a tit for tat, the Chinese government announced tariffs on U.S. oil imports as well as other energy products, in a sector that President Donald Trump promised to make great again. This along with the fact that most people believe that OPEC and Russia will decide to increase oil output even after reports that Bloomberg says that Iran, Iraq and Venezuela will veto the increase. This comes after Russia floated the idea of a 1.5 million barrel a day increase in crude supply that was more than the one million barrel a day increase that was floated around Memorial Day. Yet, the Russia trial balloon of the 1.5-million-barrel increase will only allow for more bargaining room to allow Iran and Venezuela to save face because Saudi Arabia and Russia are already gearing up to put more oil on the market no matter what Iran and Venezuelan want. The China trade war fears is scaring oil traders into believing that we could see this trade spat lower economic growth and reduce oil demand. Some have raised some concerns about European demand. Yet, a low rate environment and a more dovish Mario Draghi should renew those oil demand spirits. China is a different story as the trade war threats and refinery maintenance slowed their demand from what was recently all-time highs. Now with China targeting U.S. Energy their cost to import oil will go higher. U.S. crude exports to China were roughly 380,000 barrels per day in March, a large amount but not enough to shatter the global oil supply and demand balance. In fact, the White House's announcement of $50 billion in planned tariffs against Chinese goods and an equal retaliation by the Chinese will not really slow the global economy by that much, and so the weakness in the market is being overstated. Oil had a similar sell-off on trade war fears only to set the stage for a monster oil rally. Besides the trade tariffs won't start until early July. Plenty of time to cut another deal. Bloomberg News reports that Iran says Venezuela and Iraq will join in blocking a proposal to increase oil production that's backed by Saudi Arabia and Russia when OPEC and its allies meet in Vienna this week. "Three OPEC founders are going to stop it," Iran's representative to the bloc Hossein Kazempour Ardebili said in comments to Bloomberg on Sunday. "If the Kingdom of Saudi Arabia and Russia want to increase production, this requires unanimity. If the two want to act alone, that's a breach of the cooperation agreement." RBOB futures took a big dip but for how long? Today's national gas price average is $2.90, which is down two cents in the last week, unchanged in the last month and 60 cents higher than this time last year according to Triple AAA. Yet despite the fact that we are seeing prices higher, U.S. gasoline demand sill hit a record high last week. There is a substantial risk of loss in trading futures and options. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Phil is one of the world's leading energy 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. Phil's market commentary, fundamental and technical analysis, and long-term forecasts are sought by industry executives, investors and media worldwide. PLACING CONTINGENT ORDERS SUCH AS "STOP LOSS" OR "STOP LIMIT" ORDERS WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS. SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS. Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. Alaron Trading Corp. its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Contact Phil at 1-888-264-5665 or pflynn@pricegroup.com. |
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Robert J. Moriarty