Seasonality and geopolitics trump U.S. supply

Toxic Combination!

The oil market(NYMEX:CLK14) is rising on a toxic combination of seasonal demand expectations and a renewed sense of geopolitical risk. Reports that Russia was still amassing troops on the Ukrainian border. U.S. data also raised demand expectations as gasoline demand is rising in the heart of refinery turnaround season. Fears that China demand could be faltering is being offset by comments by Chinese Premier Li Keqiang that economic growth should be maintained at a "reasonable pace ,"  which some think is signal that the Chinese  government is ready to pull the trigger on a shot of stimulus should the Chinese economy continue to falter. On top of that the Fed is still trying to figure out the best way to start raising interest rates and some warnings that the Fed needs to pay attention to the fall-out of tightening on other economies and markets around the globe.

Oil popped after jobless claims fell more than expected. Yet we also saw the market rise on a report that U.S. intelligence thinks there is a high probability that Putin’s incursions into Ukraine are far from over. Troop movements and the building of supply lines seem to suggest that he may be getting ready to make a move. In the meantime the increased risks of sanctions are making many worried that energy may be targeted in an all or nothing gambit to try modifying Russia’s behavior. Bloomberg News reported the Obama administration is blocking certain U.S. exports to Russia, including some used in its oil and gas industry, expanding the response to the annexation of Crimea.

The State Department said it halted licensing for exports of defense items and services on March 24. Of the $1.5 billion worth of exports licensed by the Commerce Department to Russia last year, $798 million were for detonators. Those are used in oil and gas drilling, mining and construction, Burton said. Russia is the world’s third-largest producer of oil after Saudi Arabia and the U.S., according to the Energy Information Administration. The Commerce Department also awarded licenses for $367 million in software products, according to the Bureau’s annual report. Other goods licensed last year include encrypted software, ammunition for firearms, spacecraft and chemicals.

George Soros thinks the Unites States should open up our Strategic Petroleum Reserve to send old Vladimir a message. Flood the market with our massive supply of crude and tank the price; of course that might make President Obama’s meeting with the Saudi’s awkward. The Saudis are already feeling isolated by the Obama administration as it is under attack from radical Islam as well as Iranian influence in Bahrain and in other countries. The House of Saud feels Obama, with his vanishing red line in Syria and his chumminess with their Arch-enemy Iran, is abandoning and disrespecting them because we don’t need their oil. Forget all the old days where the Saudi’s pumped oil to provide cover for U.S. foreign policy.

With the world closing in around them the Saudis are looking to get sophisticated weapons to protect them from radical Shiites as well as Iran.

Natural gas(NYMEX:NGK14) popped as the EIA reported a draw of 57 bcf! The race to refill storage is on and we have to overcome a huge deficit.

Copper(NYMEX:HGK14) coming back on China demand hopes rekindled by stimulus.

Hog(CME:LHJ14) and Pigs report! How devastated is our Pig Crop! We find out today. Or at least what the government wants us to know. 

 

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.

 

Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.


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