Latest Market Commentary

September 18, 2018

Overnight President Trump announced tariffs on $200 billion of Chinese goods. The Chinese responded that they will retaliate. The initial reaction of the market when the US announcement came out last night was lower but as today arrives and traders get to work and the news of Chinese retaliation hits the news wires price have rebounded back. There are also some reports of a Russian plane being shot down adding to the market concerns. It appears this may be been accidental but is has increased tension none the less. The bullish sentiment is very high and the funds are still long this market so any news they can construed as bullish they jump on it.

Bloomberg is also reporting that Iranian crude exports have dropped more than 40% since April, which is a larger amount than the market expected adding to the concerns of a tightening market.

The bulls have been able to hold this market above support and for now keep it in a trading range. But the longer it trades in this range without a breakout to new high these bulls will get frustrated. We had a hurricane threat and it was unable to bust it out. Now we have trade war rhetoric, Iranian exports down again, as well as, other factors supporting the market but without some bullish momentum and a break out there may be the need for this market to see a corrective pullback to ease some of the pressure before it can make another run higher. 

The EIA released their monthly US Drilling Productivity Report and are forecasting crude oil production form 7 major shale oil basins to grow by 79,000 bpd in October.

According to PDVSA technical report, Venezuelan crude exports will continue to decline in October despite recent measure taken by the government to increase shipments.

OPEC’s Secretary General, Mohammad Barkindo, said the OPEC needs to keep working with other oil producers to manage global supplies as demand for crude faces headwinds. He said oil demand is robust through crude use is beginning to face some headwinds without elaborating.

Russia’s Energy Minister, Alexander Novak, and his Saudi Arabian counterpart, Khalid Al-Falih, confirmed a commitment to stability in the market and readiness to react quickly to changes following a meeting in Russia on Saturday.

Saudi Arabia made the comments that they do not want Brent crude oil to trade above the $80 dollars per barrel level, but with the sanctions against Iran in the works there will be no way to avoid it. Russia Oil Minister said also said the Iran sanctions are keeping crude in this $70 to $80 dollar per barrel range but it is only temporary, as the longer-term price of crude should be around $50 dollars per barrel.

Tim Danze, MFA Oil Company Hedging Manager