Crude oil prices are still rising despite the fact that that Atlanta Federal Reserve President Dennis Lockhart told the Wall Street Journal that the economy is ready for its first rate hike in September. Those comments drove the dollar index to its highest level since April putting downward pressure on most commodities, but not oil-- at least not yet.
The reason is more of a sign of strong demand in the United States and maybe a reason not to be as optimistic about the U.S. economy as Dennis Lockhart is. That optimism came in the form of a report from the American Petroleum institute that showed U.S. demand is very robust. The API reported that crude supply fell by 2.4 million barrels last week. And in the all-important Cushing, Okla., delivery point, where some thought they would be out of storage space by now, actually saw supply fall by 946,000 barrels last week. While supply is still way above the 5-year average one has to wonder: If oil companies continue to make cuts and demand continues at this strong pace, will we not see that cushion of supply to start to evaporate.
Obviously, prices have fallen due to fears of a slowdown in China, but if these fears are being overplayed and it seems that based upon Fed President Dennis Lockhart's assessment that the economy is strong enough to raise rates despite weakness in China then deflation and low oil prices may be temporary.
Oil prices have also been under pressure because of the potential of Iranian oil after President Obama's nuclear deal with the terrorist supporting nation. President Barack Obama is saying that it is an offer that we or Israel really can't refuse. Reuters is reporting that President Obama told U.S. Jewish leaders it was likely rockets would fall on Tel Aviv if a nuclear deal with Iran was blocked and military action ensued, according to someone who attended the speech.
Greg Rosenbaum, one of 20 Jewish leaders who met Obama at the White House , said on Israel Radio that the president spelled out what exercising a U.S. military option to strike Iran's nuclear facilities would mean if the deal between world powers and Tehran was scrapped. "He said military action by the United States against Iran's nuclear facilities is not going to result in Iran deciding to have a full-fledged war with the United States," Rosenbaum, of the National Jewish Democratic Council, quoted Obama as telling the forum.
Reuters also reported that in a separate appeal to American Jews, Israeli Prime Minister Benjamin Netanyahu, a fierce opponent of the July 14 accord, pushed back in a webcast against the Obama administration's argument that the agreement was the only way to avoid eventual war with Iran. The New York Times reported that Obama is rolling out a campaign of private entreaties and public advocacy over the next several weeks to build support in Congress for the nuclear deal with Iran--an effort to counter a well-financed onslaught from critics who have promised to use a congressional recess to pressure lawmakers to oppose the accord.
Ethanol and corn may see some pressure. Dow Jones reports that one of the world's largest traders of corn, ADM, is paying particularly close attention to recent reports that China will ease its price-support program for corn farmers as the country's grain supplies have swelled. Such a move could release a torrent of Chinese corn onto world markets. For ADM, CEO Juan Luciano notes it "could mean a decline in prices for corn, and that would probably bode well for our business." He stresses, though, it's not yet clear what China will do. CBOT corn futures have fallen some 6% the past week and a half.