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The Energy Report

Phil Flynn
http://www.pricegroup.com/
pflynn@pricegroup.com


The Energy Report 06/21/18

Production Showdown

OPEC speculation and a strong dollar on trade war fears is providing highs and lows on the oil market. Oil was rallying on a big 5.9 million barrels draw in inventory, and a record breaking week for U.S. refiners as they ran a seasonal record 17.7 million barrels a day crude oil last week according to Energy Information Administration (EIA) data. Oil was also rallying on speculation that OPEC, mainly Saudi Arabia and Iran, was ready to compromise on a smaller increase in oil production. Yet, the rally was stopped dead in it tracks after Khalid A. Al-Falih, Minister of Energy, said that it was time to change course and respond to the market.

Khalid A. Al-Falih seems steadfast that the market needs at least an additional 1 million barrels of production if not 1.6 million barrels of additional oil. He thinks that the market is undersupplied. He, along with Russia are trying to convince Iran, Iraq and Venezuela that if they don't raise production it may cause a spike in price that could derail the global economy and kill the golden oil goose.

There was some speculation yesterday that a compromise was in the works and that the increase in supply might be smaller than the 1 million barrels that is largely priced in. Yet, Saudi's tough talk seemed to suggest that may not happen. There is also some concern that we could see the cohesion between members break apart allowing the Saudis and the Russians to pump what they want even though they do not want that to happen. They are stronger together to steal a Hillary Clinton phrase. Still, it is clear that many OPEC producers can't raise output even if they wanted to for a multitude of reasons. Russian Oil Minister Alexander Novak has been pushing 1.5 million extra barrels a day.

Yet, even if we get an increase in production. What is OPEC + 1 going to do for us in the future? The Saudi's say they only have about 2 million barrels of spare production capacity. Who knows what the Russians have. And with flames burning in Libyan oil fields, it is going to lower spare oil production to historic lows. Reuters reported that East Libyan forces said on Thursday they had rapidly retaken the shuttered oil ports of Es Sider and Ras Lanuf, where the head of Libya's National Oil Corporation (NOC) said he hoped operations would resume in a "couple of days helping ease those fears in the short run."

The EIA was supportive as record refinery demand offset slight drops in demand in gasoline and distillate from record levels. Overall demand fell to 25.5 million barrels per day. U.S .domestic demand fell 1.6 Million barrels, yet export demand increased 541,000 barrels. Gasoline' stocks increased 2.5MB this week.

OPEC Trade Wars! Rising Dollar! How can you keep up? Easy! Stay tuned to the Fox Business Network where you get the power to prosper! A year ago, oil bottomed around 42.05. We predicted that major move up in our Summer Solstice Webinar. Call to get that along with our trades on all major futures markets. Make sure you request to get our special trade updates. Call me at 888-264-5665 or email me at pflynn@pricegroup.com.

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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.

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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.

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