Labor Day Oil Crush. The Energy Report 09/04/2024

Oil got crushed as a multitude of factors hit as traders started back from the Labor Day holiday weekend. First and foremost was weak global manufacturing data starting in China and ending in the US where the ISM showed stagflation with higher prices and industrial contraction. The ISM Manufacturing PMI swapped slightly higher at 47.2 from 46.8 in July but was below market expectation of 47.5. The inflation component rose to 54 from 52.9

Some of that in US manufacturing may be economy based but we could also be seeing a pullback in investment as uncertainty surrounding the outcome of the US presidential election takes hold.

Ridiculously we are hearing a politically charged report from Goldman Sachs that warns that if President Trump won the white House the US GDP would take a hit, Sort of like the predictions the last time that Trump ran against Hillary Clinton that stated that if Trump won the stock market would crash. Yet exactly the opposite happened.

Bloomberg Reported that Goldman Sachs Group Inc. economists said that “We estimate that if Trump wins in a sweep or with divided government, the hit to growth from tariffs and tighter immigration policy would outweigh the positive fiscal impulse” from maintaining most tax cuts, Goldman economists including Alec Phillips wrote in a note Tuesday.”

As far as Harris’s massive increase in the corporate tax they said that “Should Vice President Kamala Harris win and Democrats secure control of both chambers of Congress, “new spending and expanded middle-income tax credits would slightly more than offset lower investment due to higher corporate tax rates,” the Goldman economists wrote. That would result in “a very slight boost to GDP growth on average over 2025-2026.” I would assume also that these economists thought that Hunter laptop was Russian disinformation and that the Trump Campaign colluded with the Russian and the Hillary Clinton dossier was real.

There is also optimism that Libya’s oil production could be getting back to normal.  Oil Price reported that OPEC’s crude oil production dropped by 70,000 bpd in August, largely due to Libya’s ongoing struggles.

More than half of Libya’s oil production, or about 700,000 barrels per day, was offline but there are hopes it will be back online soon.

Reuters reported that Libya’s two legislative bodies agreed on Tuesday to jointly appoint a central bank governor within 30 days, potentially defusing the battle. The central bank is the sole legal repository for oil revenue and pays state salaries across Libya.

Oil exports at major Libyan ports were halted on Monday and production cut nationwide. Libya’s National Oil Corp (NOC) declared force majeure on its El Feel oilfield from Sept. 2.

We are also seeing concerns that a growing Anti-trust case against NVIDIA might cause the same type of sell-off we saw when the Clinton Administration brought an anti-trust case against Microsoft starting the top and crash in the Nasdaq.  The weakness in stocks hit oil and products as crossover selling hit all risk assets.

Interestingly enough even with the slowdown in US manufacturing and the slowdown in China manufacturing U.S. oil supplies will most likely continue to tighten we expect to see a 2 million barrel drawdown in crude supplies as well as corresponding 2 million drop in both gasoline and distillate inventory refinery runs will pull back just a little bit on dropping margins but the supply versus demand currently is still extremely tight and that should keep inventories relatively tight in fact the market better be right about a demand slowdown or we’re really going to squeeze this winter.

In fact, the recent sell-off may have OPEC rethinking the tapering off of oil production cuts. Reports are saying that OPEC may forgo the taper or at least say that they might to give the oil price a kick start.

Natural gas is going to be driven by the weather and the weather might get a lot more challenging. Fox Weather is reporting that a “trio of tropical threats emerge in Atlantic as peak of hurricane season nears.

The National Hurricane Center highlighted a new area of concern in the central Atlantic Ocean on Tuesday morning. That is being monitored for development, in addition to two other disturbances across the Atlantic Ocean and Caribbean Sea.

Download the Fox Weather ap to keep up on the storm.

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