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 violent moves may have only just begun as it appears despite pressure by the Trump administration, the kingdom of Saudi Arabia is on a mission to hurt the global oil market. One of the main targets of the kingdoms fury is Russia that refused to give in to Saudi demands to cut production. Yet the first casualty of the pol; production war may be US shale. Talk that the US may work on a bailout for US shale producers look to be a bit premature because the Trump administration did not give specifics on its economic support plans. That may have to wait because Congress controls the purse strings, and they are very busy planning their spring break vacations. Congress wants to delay a plan, so it does not interfere with their spring-break vacation. Which is very much-needed because they are so exhausted from trying to impeach the president for the last three years. In the meantime, while the Saudi Kingdom and its price war suicide mission going full-out with boosts of ‘flooding the market with 12.3 million barrels of oil a day in April and over 13 million barrel a day shortly the US shale industry is going to go in deep retreat.
Yet to save the shale, a Federal Bailout is a short-term answer, but to fix the problem, you may have to go to the source of the problem. The cause of the problem is Crown Prince Bin Salman. For a so-called world leader, it looks like the Price has lost control and may not be a good ally of the United States of America. The murdering prince that brutally ordered the killing of journalist Jamal Ahmad Khashoggi looks like he is out of control. That is not to say that the US shale industry has done everything right. They, at times, spent too much and put production numbers ahead of profit at times. Yet what Bin_-Salman has done is make an all-out assault on not only US shale but on all of his so-called allies.
The Trump administration should hit back at Saudi’s hard for Saudi’s irresponsible actions. Their market manipulation tactics and what would be called product dumping in any other situation is illegal and should merit economic sanctions. The Trump administration could use its affinity for tariffs and tax every barrel of Saudi crude. They could put pressure on Saudi investments like their movement into the US refinery space. More economic pressure from the US and its allies would make it clear to the Crown Prince that the global economy is not his plaything. With his irresponsible and selfish actions, it is no wonder that even his own family wants to overthrow him.
The American Petroleum Report (API) showed a crude glut but a very tight product market at least last week. The API reported that oil supply increased by 6.407 million barrels. Yet distillates fell by 6.679 million barrels, and gasoline fell by 3.091 million barrels.
The Bank of England cut rates by 50 basis points and the ECB’s Christine Lagarde is warning that a coordinated response may be need to ward off a 2008 like fiscal crisis.
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