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.
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.
Big oil is back, and we have earnings today but so is big LNG. OK, maybe the market for Liquefied Natural gas isn’t big yet but it is going to be. President Donald Trump boasted that “Europe will be a massive buyer of U.S. LNG as they will be able to diversify their energy supply.” Some dismissed the comments as not likely, but those who did are thinking small or not looking at the big picture. In coming generations, the United States will be the LNG supplier to the world.
The Trump Administration has a knack for cooling down crude oil prices every time they look to be getting out of control. Trade War talk, potential wavers on an Iranian oil embargo, and telling Germany that they are captive to Russia because of the reliance on them for energy supply, not to mention the resumption of some Libyan oil exports cooled off prices as they were boiling over due to rapidly falling U.S. supply.
Trade War? What trade war? The fears that President Donald Trump’s threats of tariffs would plunge the globe into a devastating trade war is easing quite a bit. The Wall Street Journal reported that “'China and the U.S. have quietly started negotiating to improve U.S. access to Chinese markets, after a week filled with harsh words from both sides over Washington’s threat to use tariffs to address trade imbalances,' people with knowledge of the matter said."
You can talk all you want about rising U.S. oil production, but the fact is that U.S. crude oil supply is below average. The Energy Information Agency, in its weekly report, said that U.S. commercial crude oil inventories fell by 2.6 million barrels to 428.3 million barrels, which the EIA says are the lower half of the average range for this time of year. This is happening even as U.S. oil production reportedly increased to 10.047 million barrels of oil a day.