Crude oil bears must face virtual reality as OPEC says that the global oil glut is “virtually” gone. Now there are reports that the Saudi oil minister Khalid al Falih wants to reduce stockpiles even further. Russian Energy Minister Alexander Novak is on board saying that Russia was committed to a deal on cutting oil supplies until the end of 2018, no matter what.
Mission accomplished. No, I'm not talking about the trade war, but we could be seeing progress on that, and not the attack on Syria, that has not happened, yet. No, we are talking about the global oil market rebalancing. The International Energy Agency that previously warned of lower for longer oil prices and warned last year that the oil price recovery was threatened by the possibility of weak demand now has changed its tune and is now saying that it is 'mission accomplished' for OPEC as oil stocks shrink at a record pace.
Both yellow and black golds are currently finding support from heightened fear among investors that the United States and its allies may soon launch a military strike against Syria. This is in response to the suspected chemical weapons attack in the country. The fear is that there might be counterstrike by Russia, which could further damage Moscow’s relationship with the West.
Crude oil prices soared after we are seeing the reduced risk of a trade war but increasing risk of heating up the real war in Syria. After conciliatory remarks by Chinese President Xi Jinping promising to announce plans to open China's economy, including lowering tariffs for cars and enforcing the legal intellectual property and technology transfers of foreign firms in the country.
There are a lot of risks that financial markets have shrugged off during the last couple of years to the amazement at times of investors, but the prospect of a trade war is clearly not one of these. European markets are following Monday’s lead from the markets posting substantial gains this morning, while U.S. futures are pointing to another strong start on Tuesday. It has become clear that the main target of Donald Trump’s tariffs on steel and aluminum was China, with a number of other countries being granted extensions and possible exclusions since the announcement, while the threats have intensified toward Beijing.
There is a lot on the plate for crude oil this week. Not only do we have the Fed meeting, we have the possibility of new sanctions on Russia and the potential pullback from the Iranian nuclear deal. This came against a backdrop of surging global demand for oil and related products.
Crude oil prices are getting geared up for the OPEC/Non-OPEC meeting in Vienna, Austria. At this meeting it is widely expected that the players involved will extend cuts throughout the rest of next year, despite some lingering geo-political and shale oil concerns. This meeting comes as oil prices pull back from a two-and-a-half-year high and global supply is tightening.