Conflicted!
Conflicting data on petroleum, conflict in Syria and conflict in the Iranian parliament is keeping the oil trade conflicted!
The Energy Information Administration (EIA) added to the confusion after releasing data that conflicted with data released by the American Petroleum Institute (API) and seemingly with the mood of the EIA’s own longer-term outlook. For example the EIA showed that U.S. oil output rose to 9.2 million barrels a day last week but they seemed to suggest in their longer term report that U.S. oil output had peaked and should be falling. Obviously one week’s data does not make a trend but it added to the conflicted trade.
The EIA also surprisingly showed a slight increase in oil supply in Cushing, Oklahoma, the key CME group delivery point. This was in stark contrast to the million barrel draw reported from the API and other private forecasters.
The EIA also shocked the market by reporting a plunge in U.S. refinery runs. The EIA said refineries operated at 87.5% of their operable capacity, down from 89% last week. In the Midwest runs plunged to a 5 year low, exploring some recent tightness in some cash markets.
The Energy Information Administration also reported that crude oil inventories increased by 3.1 million barrels from the previous week led by a record breaking surge in Gulf Coast energy stocks that rose by a whopping 4.9 million barrels. One must wonder if that number was inflated because of the track of Hurricane Joaquin that may have sped up imports and slowed oil exports.
Some are saying that geo-political conflicts are raising prices as well and especially in Syria. The BBC reports, “Nato defense ministers are assessing the "troubling escalation of Russian military activities" in Syria, the alliance's secretary-general said, ahead of talks in Brussels. Jens Stoltenberg said he is concerned about Russia's use of cruise missiles as well as air strikes, and that NATO is ready to defend all allies. NATO member Turkey said Russian jets have violated its airspace recently. Mr. Stoltenberg urged Moscow to stop backing Syrian leader Bashar al-Assad. Moscow denies Western accusations that it has mainly targeted Assad opponents, insisting its strikes have hit Islamic State (IS) infrastructure and other militant groups."
Although he supported the last 18 months of negotiations, Khamenei has not publicly endorsed the nuclear agreement with the United States, Germany, France, Britain, China and Russia that settled a standoff of more than a decade. For oil this could be very bullish as bears have made this a key point in their bearish case and have priced in the return of Iranian oil. We still feel oil is in a bottoming process. Buy breaks and call me for a trading plan.
Maybe the Iran nuke deal is not a done deal. Conflict in the Iranian parliament and tough talk from Iran's Supreme Leader Ayatollah Ali Khamenei who said he has banned any further negotiations between Iran and the United States, put the brakes on moderates hoping to end Iran's isolation after reaching a nuclear deal with world powers in July according to Reuters. “Khamenei, the highest authority in the Islamic Republic, already said last month there would be no more talks with the United States after the nuclear deal, but has not previously declared an outright ban. His statements directly contradict those of moderate Iranian President Hassan Rouhani, who said his government is ready to hold talks with the United States on how to resolve the conflict in Syria, where the two countries back opposing sides. "Negotiations with the United States open gates to their economic, cultural, political and security influence. Even during the nuclear negotiations they tried to harm our national interests." Khamenei was quoted as saying on his website, "Our negotiators were vigilant but the Americans took advantage of a few chances," he said.