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 is down as the strike on Syria’s alleged chemical weapons facilities was “mission accomplished”. The attack was by the American, French and British coalition, that the US said destroyed Syria’s chemical-weapons capabilities. The fears that this would escalate have eased so oil is back to a focus on supply and demand. Global supply is tightening and demand is strong.
There are still some concerns that there may be some complications down the road. Reuters reported that Russian President Vladimir Putin is warning that further Western attacks on Syria would bring chaos to world affairs right before the US prepares to increase pressure on Russia with new economic sanctions. Vladimir Putin, in particular, stressed that if such actions committed in violation of the U.N. Charter continue, “then it will inevitably lead to chaos in international relations,” the Kremlin statement said. The U.S. ambassador to the United Nations, Nikki Haley, told CBS’ “Face the Nation” program that the United States would announce new economic sanctions on Monday aimed at companies “that were dealing with equipment” related to Syrian President Bashar al-Assad’s alleged chemical weapons use.
We still have the US decision on the Iranian nuclear deal next month, and the real possibility that there could be even more US sanctions on Russia, possibly on its oil production. It is likely that without major concessions by Iran, the US may back out of the deal restoring sanctions on the regime that is not only backing Syria but is fighting a proxy war against Saudi Arabia in Yemen. The tensions between Iran and Israel are also rising and Iran is threatening Israel again.
You still have problems in Libya and Nigeria, so the geopolitical risk is not all gone.
Venezuela’s economy is collapsing and their oil output is tanking. OIL price reports that Venezuela’s production fell by 55,000 barrels per day in March, to 1.488 million bpd. According to the report, Venezuela’s self-reported production fell by a greater amount—77,000 bpd, from 1.586 million bpd in February to 1.509 million bpd in March. Depending on which source of information one uses (secondary source vs. direction communication), Venezuela’s production has decreased between 100,000 and 200,000 barrels per day.
IEA said last week for OPEC it was Mission accomplished as fast as getting the global supply back in balance.
The kick off to the summer driving season is here and US gasoline demand is near record highs but winter weather may slow demand a bit in the short-term.
Distillate demand will be strong hopefully in coming weeks as farmers hope to get in the fields assuming the snow melts.
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