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 continuing the comeback as the road to rebalancing the oversupplied market is starting to happen. The Saudis are raising oil prices in a sign that they are confident they can move that oil and China oil imports went through the roof. Private oil forecaster Genscape reported yesterday that supply at the Cushing, Oklahoma delivery hub fell by 350,000 barrels since last Friday, reducing fears that Cushing would run out of storage. Surging gasoline demand that increased 804,000 barrels a day last week, the biggest jump since June 2018, is catching many refiners off guard.
At least one refinery is warning that we might see some gasoline shortages. In a letter obtained by The Energy Report, HollyFrontier Refining & Marketing LLC is informing that they will only sell gasoline and product to their regular customers. The letter read, “Now that we’re entering May, we believe HollyFrontier’s gasoline and diesel inventory may get a little tight. We’re just not sure because we’re not sure how fast the economy will open back up. So, for the time being, we will be shutting off non-volume contract customers on gasoline and diesel in Nustar, Magellan, El Dorado, and Tulsa.
The Saudi’s showed they ended the oil price war by increasing oil prices and cutting production, but the fallout from their action to crash the market may have some long-lasting political implications. Dow Jones reported that, “The U.S. is removing Patriot antimissile systems from Saudi Arabia and is considering reductions to other military capabilities — marking the end, for now, of a large-scale military buildup to counter Iran, according to U.S. officials. Dow said that the U.S. is removing four Patriot missile batteries from Saudi Arabia along with dozens of military personnel sent following a series of attacks on the Saudi oil facilities last year, according to several U.S. officials. The attacks were part of hostilities that took place over several months. Two U.S. jet fighter squadrons also have left the region, and U.S. officials also will consider a reduction soon in the U.S. Navy presence in the Persian Gulf, the officials said. The redeployment of the Patriot systems, which now is underway, hasn’t been previously disclosed.
The Pentagon’s removal of the Patriot anti-missile batteries from Saudi Arabia, as well as the other reductions, are based on assessments by some officials that Tehran no longer poses an immediate threat to American strategic interests.
The timing of this is very interesting. Members of Congress were pushing for more action against Saudi Arabia for the oil price war that was a direct economic attack on the United States, not to mention the rest of the world. The Saudis acted with impunity and without regard to the negative impact their action might have on the global economy. Reports that President Trump threatened the Saudis with this type of work to seal oil cuts were widely reported. The Saudis now will have to think twice before they try to tank the global economy and attack U.S. economic interests.
Natural gas had a bit of a setback. Some reports that some shale drillers are trying to produce gas offset bullish weather developments. Still, we like the long side in here. Chart formations and the recovering economy should boost demand.
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