Volume is light but rumors are heavy this week as many in the US are taking vacation, and the President is taking a chance at Twitter bullying OPEC into bringing more oil to market.
Suggestions that the President could use the Strategic Petroleum Reserve to try and combat prices that are pushing towards 4 year highs were making their way through the market the past few days and helped cause a large but short-lived price drop in Tuesday’s session. There was also talk of a new Oil buyers’ cartel being formed, along with guesses that the Syncrude facility was coming back ahead of schedule, and even stories that the US had considered an invasion of Venezuela. So far there’s nothing credible to substantiate these rumors but in a light volume environment each one has the potential to create a real change in prices.
More meaningful than any of the rumors? Iran has suggested it would block the Strait of Hormuz (where roughly 20% of the world’s oil sails through) in retaliation against US Sanctions. While this threat has been common in the past without happening (the US Navy typically has its own opinion on navigation in the strait) given its status as arguably the most important shipping bottleneck in the world, any threat to passage will typically bring some buyers to the market.
The API was said to report inventory draws for Crude (4.5 million barrels) Gasoline (3 million) and distillates (400,000) last week. The DOE’s weekly report will be out at 11am Eastern today. Both refinery runs and oil production have a good chance to set new all-time highs, while the import/export flow is expected to remain the key driver of inventories.
No news is good news? It’s been a slow hurricane season so far, and forecasters have revised their estimates for the season to below-average owing to cooler than normal sea temperatures and high levels of Saharan dust making its way across the Atlantic. The word of caution buried at the bottom of these revised forecasts is that even though there may be fewer storms this year “all it takes is 1” to have a dramatic impact. There are 2 potential areas of development in the Atlantic currently, but neither is expected to be a threat to land in the US.
Commodity trading giant Glencore was subpoenaed by the US Department of Justice this week. It’s unclear what the investigation is about, but based on the detail given, it seems likely that oil trading practices with Nigeria and Venezuela may be at least part of the issue.