A sense of caution seems to be the theme for the financial markets as trading gets underway for the week, with investors braced and preparing for an incredibly busy week packed with both crucial economic reports and major risk events.
For oil and the markets, Russia is all the rage. There is the big OPEC/non-OPEC pow-wow in Russia and reports that Special Prosecutor Robert Mueller is opening an investigation into President Donald Trump's business transactions with Russia one day after the President said that that would be a red-line for him.
Crude oil prices are trying to recover on a weak dollar after selling off yesterday on the August oil future contract expiration. Also on a prediction by the Energy Information Administration (EIA) that US oil production would rise by 113,000 barrels a day to 5.585 million barrels a day in August from July, even as they overestimated Junes production by a wide margin.
Crude oil prices have been creeping higher four days in a row as OPEC plans an “emergency technical meeting” July 24. The move is tentative as the market is still buying into the invincibility of shale oil production and this myth that the global oil market is not balancing. The International Energy Agency tried to feed into that myth by suggesting that OPEC compliance is slipping, offsetting what is a surge in global oil demand.
Despite a record drawdown from U.S. oil inventories and the fact that Saudi exports to the United States are at a 30-year low, the International Energy Agency is backtracking its prediction of a global oil market rebalancing because of an increase in OPEC oil production.
Crude oil prices are getting a wake-up call after a lowering of the U.S. oil production outlook--a report of a major drop in U.S. oil supply and a warning by S&P to oil majors cut to back more and reduce debt levels or face downgrades.
Believe it or not the globe is headed for an oil shortage. I know many find that hard to believe, especially in this shale-crazed world where there is the belief that shale oil will fill all voids, even as investment in oil exploration falls to the lowest level since the 1940s.
Crude oil prices sold off almost 5% on what many people attributed to a story that some unnamed Russian oil company source said that Russia was against a production cut. Today those sources are still unknown, but really the sell-off in oil probably had more to do with the fact that Saudi Arabia cut prices to Asia as the kingdom was losing market share to Iraq and Iran that has been raising output and taking away business from the Saudis.
Crude oil prices are under pressure after an unconfirmed report was released that Russia would oppose and additional output cut and instead would stay the course on current cuts. Yet, an unsourced story from Bloomberg was enough to break oil that had been on a streak of eight up days in a row, one of the best runs in oil in seven years.