Global markets are in a tizzy because of concerns that the latest revelation that President Donald Trump may have “obstructed justice” by asking former FBI director James Comey to go easy on Thomas “Mike” Flynn the retired United States Army lieutenant general who was the first national security advisor appointed by President Trump. Apparently, there is a smoking gun or a memo that Mr. Comey made at the time but because no one has read the memo no one is quite sure what is in it. Are the charges real or being trumped up by a press that has been openly hostile to the President? It matters for oil because if these latest charges slow down, Donald Trump’s pro-growth agenda could hurt oil demand going forward and slowdown the oil rebalancing process. That just trumps everything up.
Oil Initially reacted negatively to the American Petroleum Institute (API) report as it showed a surprising increase in U.S. oil supply. The market was expecting a draw and it hurt current thought that U.S. oil inventories had topped out. Yet, if you look at the Cushing Oklahoma delivery point we saw a larger than expected 882,000 barrel drop in supply. That sent mixed signals as did the oil product numbers.
Of course, the rebalancing process is what the trade cares about. Forget about the demand side for the traders it is all about supply.
The International Energy Agency made trade think that OPEC may not only have to extend production cuts but add to their cuts. They may need to restrain output ambitions from Libya and Nigeria as well unless there precarious political and security situations do it for them.
Oil, of course, will have to look for any clues out of the cartel as they a plan to deal with a situation where supply is not falling as fast as they hoped. Global crude oil supply fell 140,000 barrels daily last month, to 96.17 million bpd, the International Energy Agency said in the latest report. Yet at the same time they said that commercial oil stockpiles in the OECD countries increased from March to 3.025 billion barrels, marking the first increase since January. Still the April supply was at 96.17 million bpd about 90,000 bpd lower than in April 2016. The IEA says more work needs to be done.
