About The Author

Phil Flynn

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 retreating on general risk-off sentiment. There was some disappointment that Saudi Arabia does not plan to extend its voluntary production cuts of 1.18 million barrel of oil a day in July. Even though, I do not necessarily believe that they will raise output, because I think they’re using that as a carrot to keep cheaters like Iraq in line. We also had news that Libya has restarted its largest oil field on Sunday night, adding more oil to the market.  $40 a barrel was a target for many bulls, and that may have inspired some profit-taking, yet news breaking overnight might set the stage for a turnaround Tuesday.

Oil traders that sold on Libyan oil production coming back online better reverse course.  The El Sharara oil field is located in Murzuq Desert; Libya’s largest oil field is down again. A statement from Libya’s National Oil Corp says workers have been told to stop working because an armed force entered the oilfield. That will stall Libyan oil exports yet again.

While Iraq has been one of the targets of displeasure from  Saudi Arabia because of their overproduction and the reason they may end voluntary cuts, it seems that Iraq may change their ways.

Iraq’s new Minister of Oil, Ihsan Abdul Jabbar Ismaael, confirmed in a phone call with Prince Abdul Aziz Bin Salman, Saudi Arabia’s Minister of Energy, his country’s full commitment to the decisions taken at the OPEC meeting. There is some talk that not only will Iraq comply with cuts, but do additional cuts to make up for their past bad behavior. If that is the case, the fears that we will see more oil in July may be unfounded.

More cities start to reopen, and more gallons of gasoline will be consumed. The grand reopening is giving RBOB futures an energetic upward track. Gasoline demand is going to be an excellent barometer of the depth of the consumer and the overall economic recovery. Tonight we will get the American Petroleum Institute report, and that will give us a look at where the oil demand recovery is at.

Tropical Depression Cristobal will not be positive for natural gas demand. According to the Weather Channel the storm will bring heavy rain, gusty winds and possible isolated tornadoes as it tracks farther inland through the Midwest on Tuesday. “Cristobal’s area of low pressure is centered in Missouri right now. It will track north-northeast across Wisconsin and the Upper Peninsula of Michigan through Tuesday night while transitioning into a non-tropical low-pressure system. That path is ahead of a frontal system approaching from the Plains, where wet and windy conditions are also expected today.” Not suitable for driving and cooler temperatures and power outages will kill natural gas demand.
Thanks,
Phil Flynn

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