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 did a late swoon on news that President Trump was going to give a speech on the environment. Ok, well on a hot July afternoon the market did not have a lot of other stuff to go on. Why the oil market feared the speech is another question, but it shows you in the heat of the summer and with light volume crazy things can happen
Yet what is really crazy is Iran taunting the globe by raising its uranium enrichment to dangerous levels unless the EU finds a way for them to sell oil. According to the AP, Iran on Monday began enriching uranium to 4.5%, just breaking the limit set by its nuclear deal with world powers.
The International Atomic Energy Agency, the U.N.’s nuclear watchdog, confirmed that Iran surpassed the enrichment threshold. Experts warn that “higher enrichment and a growing stockpile could begin to narrow the one-year window Iran would need to have enough material for an atomic weapon, something Iran denies it wants but the deal prevented.“
It is clear that Iranian price risk still exists and unless Iran backs down or the EU finds a way to get them to change their ways, we are on the path to conflict. Israel for one will not stand by forever and wait for Iran to get a nuclear weapon.
Oil should bounce back when you focus on real fundamentals. For example, we should get a substantial drawdown in U.S. oil inventories. Private intelligence service Genscape showed oil supply in Cushing down -1,244,131 million barrels. Add to that a big expected draw in the Gulf Coast as well as expected record gasoline demand should lead to big draws across the board.
It should also get support from the return of the U.S. China trade talks. Any signs that there is progress will rally oil and products. Also Fed speak today ahead of Jerome Powell’s testimony before congress. Look for Democrats to try to get Powell to bash Trump. That’s all they really care about.
Summertime is here and Nat gas is going to feel it. The injection this week should be a relatively small 78 bcf.
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