Fundamentals rule. The U.S. conflict with Iran and the widespread instability across the Middle East are only registering as blips on the oil market radar. Not even the seizure of an Iranian oil shipment to Syria could move the needle.
Oil prices continue to fall on a series of critical fundamentals:
- US crude production fell for the third week in a row, but the US crude oil inventory draw was uneventful at best.
- Wednesday US govt data shows new orders for factory goods plummeting for the second consecutive month in yet another sign the US economy is weakening.
- On the sanctions front, Venezuela’s exports are actually recovering as it continues to export oil to Asia (mostly China).
- The extension of the OPEC production cut deal earlier in the week had a subdued effect because the market had priced it in ahead of time.
The elephant in this room is definitively the US economy and signs of slowing global demand growth. The EIA, IEA, and OPEC have all revised their own demand growth projections downward, ranging from 1.14-1.2 million bpd for 2019, and 1.4 million bpd in 2020. It’s a big elephant.
Iranian Oil Flows Freely To China. Now It’s Time To Save Face
Sanctions on Iran aren’t working. That much is clear. Chinese ships importing Iranian crude have been monitored by Israeli intelligence (which is keen to keep this conflict brewing) and commercial ship trackers. The trick is to remove radar from the…