We now have more evidence that the oil supercycle is underway, crude prices are on the rise as global demand and underinvestment in new oil projects are starting to take their toll on global oil supply.
Where did all the crude oil go? Long time passing! A 7.06 million-barrel drop, the seventh drop in a row in a crude adding oil supply drawdown of historic proportions. Record refinery runs were operating at 96.7% of their operable capacity last week, running 17.6 million barrels of crude oil per day.
Iran’s Revolutionary Guard says it put a stop to the protests in Iran, yet the oil traders are not that convinced. After many arrests and more than 20 dead, the Iranian people are tired of being left out of the global economic surge. At the same time, the global economic surge is draining U.S. and global oil reserves at a record pace.
The unrest in Iran may give the Trump administration the ammunition it needs to back out of the Iranian nuclear deal and slap new sanctions on Iran. President Trump views Iran as the number one state sponsor of terror and feels that the Iranian regime is one of the major causes of war and conflict in the region. Trump wants to take a hard stance against Iran and this could be his opening.
U.S. markets started where they left off for 2017. Initially, it didn’t look like this would happen. For the week between Christmas and New Year’s, the action was very questionable and by Friday they started selling.
Market players marched into the 2017 trading year adopting a risk-on attitude, amid growing optimism over Donald Trump pushing ahead with a large fiscal spending package. The “trump effect” not only elevated global stocks to 19-month highs in January, but also sent the U.S. dollar to its highest level in 14 years.
The gold volatility index moved to a new all-time low and there was no meaningful action in gold recently. Well, we profited on the decline and on the following upswing, but the price action that we saw was nothing to call home about. For months, gold has been moving around the $1,300 per ounce level and it’s trading relatively close to it also today. But, will this action persist for much longer? Not likely. It seems that something is about to hit the fan.