Crude oil is struggling even after the Energy Information Administration (EIA) reported the sixth drawdown in crude oil in a row and the fact that U.S. oil production dipped for the first time in 13 weeks. The bears argue that while we have seen declines, they will have to be much larger to drain off excess supply.
As far as production they will say that the drop was insignificant as most of the drop came from Alaska and not the lower 48 states. The mood is negative ahead of the big OPEC meeting that the bears say won’t be enough to drain inventory and ahead of the Iranian election that could wake up the risk trade for oil. But what seems to be really souring the mood is the Trump slump, which with the appointment of a special prosecutor may hamper his ability to push through his agenda.
The EIA reported that U.S. crude supply fell by 1.75 million barrels last week. The drop was led by a big 5.551 million barrels drop in Gulf Coast stocks but was offset by a big 2.027-million-barrel increase in the West Coast and a 728,000-barrel release from the U.S. Strategic Petroleum Reserve. The EIA did report a surprisingly small 35,000-barrel increase in the Cushing, Okla., supply which was in stark contrast to the 500,000 barrel plus reported by the American Petroleum Institute. The report did inspire a rally but the weak stock market did not allow any follow through.
The EIA also reported a smaller than expected 412,999 million barrel drop in gasoline supply. Still, gas demand was up again to 9.452 million barrels a day. Distillate inventory also posted a large 1.94-million-barrel drop. Yet the differences between the API and EIA reports seemed to cause confusion and failed to inspire conviction on either the bullish or bearish side.
Then there's President Donald Trump. After revelations surfaced that he may have tried to influence former FBI director James Comey in an investigation, the market seemed to panic. It seems to be a bit better after another former FBI Director Robert Mueller was named special prosecutor into an investigation of, "Russian government efforts to influence the 2016 presidential election, and related matters." Of course, it is those related matters that may stall tax reform and a pro-growth agenda and may stall energy demand.
Iran's supreme leader, Ayatollah Ali Khamenei, is warning of election fraud that may set the stage to put his own guy in as President. Ebrahim Raisi, a hard-liner, is the Supreme Leader’s Choice. Stay tuned!