About The Author

Phil Flynn

Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665

Oil prices are on the rise after Baker Hughes reported the U.S. oil-rig count fell by 7 to 797 rigs. After recent increases that might not seem like alit, but a lot oil traders now know that to keep U.S. shale production rising you must keep on drilling. Steep shale decline rates means you can’t let up or production will start to ebb and fall. Globally, even with increases in U.S. oil production the overall decline rate of oil production has fallen by 4%. The lack of global drilling, underinvestment and problems like Iran and Venezuela have seen global production fall at a time when the mirage of U.S. production masks a looming global oil squeeze.

This comes as Bahrain announces a major oil find.  Bahrain, using new shale technology, has led strikes oil in biggest find since 1932 or maybe ever. The country plans to provide additional details on Wednesday about the reservoir’s “size and extraction viability”, so stay tuned.

The market also is talking about the possibility of New Sanctions on Iran. Reuters news reports that President Donald Trump has threatened to pull out of a 2015 international nuclear deal with Tehran, under which Iranian oil exports have risen. He has given the European signatories a May 12 deadline to “fix the terrible flaws” of the deal. The hardline on Iran may offer more support for oil but the real reason why oil is rising is supply and demand.

Demand in China for example. Despite trade war fears, China’s demand for oil continues to ramp up. Reuters reports that growth in China’s manufacturing sector picked up more than expected in March as authorities lifted winter pollution restrictions and steel mills cranked up production as construction activity swings back into high gear. The official Purchasing Managers’ Index (PMI) released on Saturday rose to 51.5 in March, from 50.3 in February, and was well above the 50-point mark that separates growth from contraction monthly. Analysts surveyed by Reuters had forecast the reading would pick up only slightly to 50.5. With those expansion rates in place, oil demand in China should stay near records.

Demand for Gasoline that already hit a record in March looks to continue into April. Refiners have to balance meeting strong current gasoline demand with building up supply of the summer blends of gasoline. Rising prices means the return of $4.00 a gallon gasoline in some places like San Diego.  Of course in California they seem to like high prices.

The AP reports that The Trump administration is expected to announce that it will roll back automobile gas mileage and pollution standards that were a pillar in the Obama administration’s plans to combat climate change. It’s not clear whether the announcement will include a specific number, but current regulations from the Environmental Protection Agency require the fleet of new vehicles to get 36 miles per gallon in real-world driving by 2025. That’s about 10 mpg over the existing standard.

Any change is likely to set up a lengthy legal showdown with California, which currently has the power to set its own pollution and gas mileage standards and doesn’t want them to change. About a dozen other states follow California’s rules, and together they account for more than one-third of the vehicles sold in the U.S. Currently the federal and California standards are the same according to AP.

Cold weather is supporting both Ultra low Distillates and natural gas. Farmers are planting less acres according to the USDA report that sent soybean and corn prices soaring. Low grain prices have left idle acres but do not be fooled if you are planting. The global market for diesel is tight so lock in prices before we surge again. Gasoline buyers should be hedged as well.
Thanks,
Phil Flynn
Questions? Ask Phil Flynn today at 312-264-4364

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Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses.

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 futures. The Price Futures Group, its officers, directors, employees, and brokers 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. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2018

 

You can keep up on the latest gasoline news on the Fox Business Network you can also call me to get special intraday updates at 888-264-5665 or email me at pflynn@pricegroup.com

 

Questions? Ask Phil Flynn today at 312-264-4364         A Subsidiary of Price Holdings, Inc. – a Diversified Financial Services Firm. Member NIBA, NFA Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses. 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 futures. The Price Futures Group, its officers, directors, employees, and brokers 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. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2018
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