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
Planes and cars and steel is one thing, but now it’s serious because we are talking soybeans. China decided to hit at the heart of U.S. China trade by taxing the beloved American soybean. The move was viewed by the market as the first real sign that the potential trade war is serious because China loves and need U.S. soybeans. Historically China introduced the U.S. to the soybean and we have been happy to sell them back to them.
China went to the trade war nuclear option, putting a 25% tariff on U.S. soybeans that they will at some point desperately need. The soybean tariff is really being seen as the most serious. U.S. relies on China to buy one-third of the U.S. crop. China will have to come to the U.S. regardless of tariffs and the word that China hits back in a futile and stupid gesture only helped spill the soybean and other global markets. Soybeans are one of the most underappreciated commodities, yet the reaction to today’s China tariff is rocking global markets. Heck maybe we should base a cryptocurrency on soybeans as soybeans are amazingly valuable to many economies. While in the U.S. there will be time to pullback on tariffs it is unclear whether China tariffs will go into effect right away, but China says they are still open for U.S. trade talks.
Soybeans are used for almost everything, from feed to fuels, and the tariff sent shocks to the oil market that was trading higher before the soybean tariff and quickly reversed course. This comes after really a lot of supportive news on the oil fundamentals’ front. Despite the hope by OPEC skeptics, compliance to the OPEC/Non-OPEC deal has never been better. Reuters reported that OPEC’s production in the first three months of 2018 has fallen by 425,000 barrels per day (bpd) from its 2017 average, a company which tracks OPEC supply forecast on Tuesday, indicating strong compliance.
Reuters reported that supply from all 14 OPEC countries in the first three months of 2018 averaged 32.27 million bpd, tanker-tracking firm Petro-Logistics said in an email, down 425,000 bpd from OPEC’s average daily supply for 2017. “OPEC-14 supply in the first quarter of 2018 declined to the lowest quarterly level since the production curtailment agreement came into effect some fifteen months ago,” Petro-Logistics said. Petro-Logistics said that when compared with the same period last year, OPEC supply in the first quarter has fallen by 113,000 bpd.
The API reported a surprise drop in U.S. crude supply as well, which was supporting prices even as the overall data raised eyebrows. The API reported a 3.28 million barrel drop in crude supply even as supply in Cushing Oklahoma increased by a whopping 4.058 million barrels. A build of 1.123 million barrel in gasoline and a 2.2million barrels was also a bit surprising and we will wait to see what the EIA has to say about it.
Nat gas is on borrowed time! Snow and ice cover the roads in Illinois in April but will it stay cold forever? Even with the cold record, U.S. Nat gas production should weigh on prices. Andrew Weissman writes that strong early spring heating demand may push continued gas withdrawals through mid-April, providing support to the front-month contract in the immediate term. By later this month, however, demand could precipitously decline amid what may be a twelve-week span of injections averaging over 100 Bcf.
Although end-of-withdrawal season storage is the second-lowest of the decade, NYMEX natural gas calendar spreads indicate the market is not concerned with the end-of-injection season inventory trajectory. If accurate, lower early November tallies could reduce functional demand to refill inventories and lead to downward pressure on natural gas later in 2018.
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
Get the power to prosper! Stay tuned to the Fox Business Network! Call me to get the latest updates on trade war trades at 888-264-5665 or email me at firstname.lastname@example.org
Questions? Ask Phil Flynn today at 312-264-4364