A headline at the Wall Street Journal reads ‘Oil Edges Up Amid Supply Jitters in Iran, Venezuela‘.
From the item: “...looming supply outages in Iran and the increasing outages in Venezuela explain why prices recovered quickly again“.
I mean…I guess?
It’s not like these aspects haven’t been factored into trading psychology for weeks now…I think there is a very base, human desire to answer the question ‘WHY?’ We want to know the why behind the what…Crude was heading downward and then had a retracement, so people want to know why.
I have worked with some people who often gave me an answer to my ‘why’ questions that drove me nuts. “There are more buyers than sellers,” they would say at times when I asked why the markets were moving up. Sometimes, that’s simply true. This just seems to be one of those times.
Propane has followed suit with crude, after seeing a significant drop off yesterday morning on the heels of the 4M/bbl draw in inventories. Propane prices came back in the afternoon, but I still see a ‘down and to the right’ trajectory on the propane price graph this summer.
RECORD OIL EXPORTS: From the WSJ: “The country shipped $19.9 billion in petroleum—a category that includes crude oil, liquefied gases and fuels such as gasoline—to other countries in April, the Commerce Department said Wednesday. That set a record after adjusting for inflation and seasonal factors. The U.S. is exporting four times as much petroleum each month as it did a decade ago.”
That’s as pretty staggering figure on its face…it’s a big number despite its historical context; ten years ago, we weren’t really exporting much of anything petroleum related, given the 2015 lifting of the ban on the United States exporting oil. Since that has been lifted and the rise of the Shale Revolution, the United States is a major, major global player.
WHIM (Why It Matters): What matters to crude matters to propane. This won’t be the last time I remind you of that. At some juncture, United States crude production and exporting could help tip the balance of global supply and demand into an oversupplied position, which would create downward pressure on crude oil prices. Domestic oil production and exporting is such a force that it’s now forcing OPEC to make production decisions based on what the Americans will be doing, as we are not a part of their cartel.
OPEC was forced to cut back on production in late 2015 after it’s attempt to oversupply the markets and bankrupt the American Shale boom failed. That led to the rise in oil prices from roughly $27/bbl WTI in January of 2016 to over $72/bbl WTI in late May 2018. That said, OPEC just released some data that says the value of their oil exports increased 28% in 2017, which likely offset loss of gross revenues from lower production.