If you want 11 million reasons to be optimistic about America, you might want to start with counting barrels of crude oil. The Energy Information Administration (EIA) reported that U.S. crude oil production exceeded 11 million barrels a day for the first time in history. Not too many years ago, that would have seemed to have been impossible by many who lacked the imagination and drive of those in the U.S. energy industry.
Fed Chairman Jerome Powell’s testimony took its toll on crude oil, and a bearish report from the American Petroleum Institute (API) isn’t helping either. The Fed chairman caused the dollar to soar which pressured many commodities as he told the Senate Banking Committee that "Several years” of strong jobs, low inflation still ahead of us."
Crude prices got whacked on oil supply, real and imagined. Talk of futures strategic petroleum reserve releases along with signs of real increases of production in some OPEC countries sent oil into the basement. Weak economic data out of China and some warnings about trade wars by the International Monetary Fund did not help and it overshadowed the reality that U.S. oil supplies will probably fall dramatically again this week.
The world’s oil-consuming nations are showing growing unease about the rapidly tightening global crude oil market and are considering releasing oil from their strategic petroleum reserves. On Friday, Bloomberg News reported that the Trump Administration is reviewing options ranging from a 5 million-barrel test sale to the release of 30 million barrels from its oil reserve to cool pump prices ahead of congressional elections in November and as sanctions on Iran are due to snap back.
Expect more crude oil price volatility as the global oil market can flip from a global supply surplus to a global supply deficit at the drop of a hat. The market is trying to assess whether more sources of oil will get us to the point where daily global oil production is once again ahead of our daily consumption. So far it has not.
The biggest crude oil draw since 2016 was not enough to stop oil from a major drop in price. A slew of oil supply side stories includes the resumption of Libyan crude exports, an increase in Saudi Arabia crude output, possible waivers on U.S. sanctions on Iranian oil and reports that oil is on the agenda when President Donald Trump and Russian President Vladimir Putin meet next month.
The Trump Administration has a knack for cooling down crude oil prices every time they look to be getting out of control. Trade War talk, potential wavers on an Iranian oil embargo, and telling Germany that they are captive to Russia because of the reliance on them for energy supply, not to mention the resumption of some Libyan oil exports cooled off prices as they were boiling over due to rapidly falling U.S. supply.
The deadline has passed. President Donald Trump fired the trade war shot heard around the world as he suggests the United States is mad as heck and isn’t going to take the record $375 billion trade deficit with China in 2017 anymore. Around $34 billion in tariffs went into effect at midnight with China calling it the start of the largest trade war in history and retaliating by adding $34 billion dollars of its own tariffs.