Oil prices had a tough time staying higher as trade war fears and distraction took the market focus off tightening global oil supply. While many are making ominous predictions of what this trade war may do to economic growth, the reality is that if we are overestimating these concerns the oil market is going to be woefully undersupplied. The Energy Report has been raising the warnings for some time about the impact of underinvestment in the energy sector and now those chickens are coming home to roost. Even the most diehard oil bears are now starting to realize that the math of meeting supply with demand just does not add up. U.S. energy Secretary Rick Perry is starting to get it as he said yesterday that the OPEC production increase may be a little short of what is needed to prevent shortages.

Those shortages could become acute in the U.S. as Syncrude Canada says production at its oil sands facility in Alberta, producing as much as 360K bbl/day, is offline at least through July. That comes as U.S. refiners are buying and running crude at a record rate to keep up with demand.

Some are speculating that Secretary Perry will ask the Russians to pump more oil, as despite the best efforts of U.S. producers, they can’t meet the needs of the refiners and the infrastructure issues and the lack of pipeline capacity is going to force them to slow production until the bottlenecks can be eliminated.

Energy Secretary Rick Perry also warned that he is trying to “raise some warning flags” about President Donald Trump’s trade policies to make sure “we don’t shoot a bullet that goes through the intended target and hits whoever is standing behind it.”

Yet, a slowdown in growth may be what it takes to avoid an oil price spike.  Genscape, the private Cushing Oklahoma monitor, reported that crude supply bounced back from last week’s -2,249,872 draws but only by 198,315 barrels. Those supplies will fall further as the Canadian outage and the slowdown in imports will drain Cushing dry to the bone.