With the Trump Administration working toward zero Iranian exports by November, Libyan oil supplies at risk due to clashes with militias, and crashing supply from Venezuela, reports of tightening U.S. supply is keeping oil on edge. Crude oil price continued its drive, hitting $74 a barrel for the first time since that fateful OPEC meeting in November 2014.
The global oil market supercycle that we predicted would happen a few years ago is becoming increasingly clear to the crude oil market. It is hard to ignore what is happening when the data in the United States and around the globe is seeing the seeds of a bull market in energy that will last for years.
The U.S. State Department laid down the gauntlet as the United States threatened to slap sanctions on countries and companies that don’t cut oil imports from Iran to “zero” by Nov. 4. That’s right, zero, zip, nada you name it. There will be no waivers granted at this point and the United States is going to issue penalties to those that decide to buy Iranian oil.
Crude oil prices had a tough time staying higher as trade war fears and distraction took the market focus off tightening global oil supply. While many are making ominous predictions of what this trade war may do to economic growth, the reality is that if we are overestimating these concerns the oil market is going to be woefully undersupplied.
All is well in OPEC land. OPEC kept it together with a unanimous deal, even though there is still disagreement on what the deal in Vienna means. Post OPEC, we have a rising dollar on China/U.S. trade tensions and a major Canadian oil sands outage that will buoy U.S. prices.
The historic OPEC NON-OPEC production agreement became known as OPEC plus one. Russia became that plus one as they joined OPEC and conspired with them to reduce production and ultimately raise production and reduce supply. As OPEC meets today it is OPEC minus one. Iran seems to be the lone holdout from a production deal that’s on paper.