Saudi Arabia takes a victory lap

June 2, 2015 08:44 AM

Crude oil prices are testing key resistance as Saudi Arabia takes a victory lap ahead of the OPEC meeting and private Forecaster Genscape reports a substantial oil supply drop in Cushing, Okla. The European Central Bank and the European Commission had a late-night meeting to try to solve the Greece problem, raising hopes once again that maybe, just maybe, Greece won't default.

It's "Mission Accomplished" again for Saudi Arabia as Saudi Oil Minister Ali Al-Naimi says, "See, I told you so." Well maybe he did not put it quite that way, but he did say that the "Saudi Strategy" to flood the market with oil and slow down the U.S. oil producer is "working." Maybe he Is judging that on the record string of oil rig count cuts or the hundreds of billions of dollars in Cap X cuts or maybe because he sees the market strategy to tighten. Naimi says demand is picking up and supply is slowing and the market is in balance.

Life is good. So good that Naimi is saying he is happy, not stressed and feeling good. I wonder if he will still feel good after he talks to the Iranians. Iran wants to let it be known that it want its OPEC market share back if, and when they are allowed back into the market if sanctions are lifted. This comes as India found new sources of oil.    

Reuters reports that "India's imports of Iranian crude oil rose last month to their highest level since March 2014 as refiners boosted purchases ahead of a final push by international negotiators to reach a deal on Tehran's disputed nuclear program by end-June. The jump to a 14-month high comes just two months after India dropped its crude imports from Iran to zero under U.S. pressure to limit its purchases of the Islamic republic's oil. In March this year India did not take any Iranian oil for the first time in at least a decade. India also cut interest rates but said they would wait to cut rates again until after they access the impact from Monsoon rains.

Oil prices also got a boost from the Genscape report. Genscape reported that Cushing supply came in at 61,315,000 barrels, which is down 833.000 barrels from May 22 and down 1.109 million barrels from May 26. Yet, oil prices are being slowed as Greece hopes spring eternal. A late night meeting of top EU leaders is raising those hopes. If oil closes above $61 we should see a test of 6570 soon.

Ethanol prices took a hit after the USDA reported that 95% of the corn crop is planted and 74% of U.S. corn crop was in good or excellent condition. That comes after the disappointing ethanol mandates.

Wheat may be in trouble as winter wheat conditions declined to 44% good or excellent, down one percentage point from last week. In Texas, a major wheat-producing state, just 51% earned top ratings, down from 56% last week and now with talk of frost damage we could see wheat run!

About the Author

Phil Flynn is a senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. Phil 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.