U.S. crude oil production is falling while Iranian production is rising as we grow more dependent on Middle Eastern oil each passing day. The Energy Information Administration reported that U.S. oil production fell 200,000 barrels a day down to only 8.428 million barrels a day.
Crude oil remains on the defensive after declining strongly to start the shortened trading week on Tuesday. Oil market participants have turned less confident that the global rebalancing pattern is truly underway as the latest round of short term fundamental data have started to tell a different story. Last week the market was mostly focused on post Brexit trading along with the long holiday weekend in the United States. This week market participants have moved on from the UK vote and are evaluating the short and medium term oil market direction based on the normal price drivers like current and projected fundamentals, technical s and the externals (direction of the U.S. dollar and global equities).
Crude oil has been among the biggest gainers in the first half of the year. One of the main reasons oil bounced back sharply was probably the fact that it had fallen well below its fundamental value due to panic selling earlier in the year.
Regrets? Do they have a few? The hangover continues from the Brexit vote and global markets have a headache. While crude oil is trying to shake off the Brexit shock, it is having a hard time even though the supply and demand fundamentals are much tighter right now than almost anyone could have predicted.
The EIA reported crude oil fell by only 900,000 barres last week. That was a shocking contrast to the 5.5-million-barrel drop that we saw in the API report. What was more interesting is that in all of the most watched areas of crude supply, we saw a sizable drop in supply.
Sometimes bookies come in handy. According to the bookies in London, the odds of the UK staying in the EU is above 80%. While the bets against a Brexit seem to be gaining momentum, the crude oil market is grappling with a surprise drop in supply and potentially more supply risk in Nigeria.
The front month natural gas contract hit a new high for the year just as the summer solstice was about to begin. Record high temperatures in southern California and the American southwest are already raising fears about natural gas shortages. California is warning about emergency measures and talking about rolling blackouts--and we have not even gotten through the first full day of summer!