With the Trump Administration working towards zero Iranian exports by November, Libyan oil supplies at risk due to clashes with militias, and crashing supply from Venezuela, reports of tightening U.S. supply is keeping oil on edge. Oil prices continued its drive, hitting $74 a barrel for the first time since that fateful OPEC meeting in November of 2014. That was the meeting where OPEC declared a misguided production war that caused oil prices to crash. Now we are on the other side of the momentum indicator as prices are rising with a bullet.
Supply fears are rising after a report by private forecaster Genscape showed that supplies in at the biggest U.S. storage complex in Cushing Oklahoma drained once again falling by 3.215 million barrels to a multiyear low 29,956,463 million barrel. That drop means that we are getting close to a level where supply in the storage hub is so low that they will not be able to supply refiners with much oil. They need enough to stay operational. That lack of a Cushing cushion and U.S. refiners demanding more crude is causing prices to spike. The report caused a surge in oil prices and the Trump State Department tried to cool the passions.
Reuters reported that the United States is prepared to work with countries on a case by case basis to help them reduce imports of Iranian oil as Washington prepares to re-impose sanctions against Tehran in November, a State Department official said on Thursday, suggesting the Trump administration could offer waivers. A senior State Department official said this week that countries will need to cut their imports of Iranian oil to zero by November and exemptions are unlikely. Secretary Pompeo met with the Department of State with Saudi Minister of Energy, Industry, and Mineral Resources Khalid al-Falih. They discussed energy security and other issues of mutual concern.
Yet, that is not enough to ease concerns. Saudi Arabia is being asked to raise production to make up the difference. Also, the Trump Administration is asking Saudi Arabia to collude with Russia to fill the void of Iranian supply. In Fact, Russia and Saudi Arabia are together on oil policy, which is strange because Russia is a strong ally with Iran. Oil politics and regular politics creates strange bedfellows.
