A bearish American Petroleum Institute (API) report, as well as the continuing drama surrounding Turkey is raising fears of a slowdown in oil demand based upon fears of raising contagion coming out of Turkey. The oil market that tried to mount a major comeback yesterday was thwarted by a risk aversion in the dollar that sunk oil, as well as industrial and precious metals.
The crude oil and petroleum markets took a Turkish bath yesterday, but in doing so it may have washed out the bearishness and put in our seasonal low. The moves in the market seemed beyond crazy because at the end of the day the Turkish currency crisis is a much more political than financial crisis. Oil moved on the Organization of the Petroleum Exporting Countries, lowering its demand forecast and fears of a rise in supply, but it was Turkey that cleansed the market.
Global stock markets are rattled as the President of Turkey, Recep Tayyip Erdogan, is running his economy into the ground, raising contagion fear surrounding other European nations. Initially, crude oil was following the stock markets down, but then turned positive on a report from the normally more bearish leaning International Energy Agency, which is warning that as oil sanctions against Iran take effect, perhaps in combination with production problems elsewhere, maintaining global supply might be very challenging and would come at the expense of maintaining an adequate spare capacity cushion.
Even in long-term bull markets, you are going to have a day like Wednesday. Crude oil and products crashed down to major support as it was hit with a confluence of headlines and bearish weekly Energy Information Administration data. Fears of the impact of sanctions on China, Iran, Russia and Turkey did not help and another big drop in U.S. gasoline demand has some worried that U.S. consumers were showing resistance to higher pump prices.
While the market starts to come to grips with the new sanctions on Iran and a larger than expected crude draw, as reported by the American Petroleum Institute (API), what should concern them is that U.S. crude oil production is not quite what it was fracked up to be.
Crude oil prices are on the rise as President Donald Trump warns the world that anyone trading with Iran will not be trading with the United States. That pronouncement is directed at the European Union, which issued a statement Monday in Brussels saying, "We deeply regret the re-imposition of sanctions by the U.S., due to the latter's withdrawal from the Joint Comprehensive Plan of Action (JCPOA).
Snapback after a whack, give a dog a bone, this old man comes rolling home. It looked doomy and gloomy in crude oil for a while as trade war fears and reports of increases in OPEC and Russian oil production weighed on market psyche. Yet, after a report about another drop in supply in the Cushing, Okla., delivery point, and talk that U.S. oil production is not what it was reported to be, the mood quickly shifted.
The U.S. petroleum markets were just trying to adjust to a surprise increase in U.S. crude supply, when The Wall Street Journal reported that the Trump Administration is considering more than doubling proposed tariffs on a further $200 billion worth of Chinese goods to 25%, up from an original 10% tariff that was put in place before.