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3 Things To Watch In Oil Markets

By Ellen R. Wald, Ph.D.CommoditiesAug 04, 2022 05:09AM ET
www.investing.com/analysis/3-things-to-watch-in-oil-markets-200628050
3 Things To Watch In Oil Markets
By Ellen R. Wald, Ph.D.   |  Aug 04, 2022 05:09AM ET
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As we hit the slow days of summer, here are three important issues that should be on every oil trader’s radar.

1. Yesterday’s OPEC+ Meeting

The OPEC+ group met virtually on Wednesday and, as I predicted last week, agreed to a very minor increase in production quotas for September--just 100,000 bpd. This will bring the total production limit for OPEC+ in September to 43.955 million bpd. However, it is unlikely that the market will see this amount of oil, because many producers cannot increase production. This increase is so negligible when compared with the total global oil supply of around 100 million bpd, that it is essentially nothing. This all seems to show how little respect Saudi Arabia has for the Biden administration, especially when considered in the context of President Biden’s visit and the administration’s subsequent announcement that the market would soon see “more steps” coming from Middle Eastern producers.

OPEC+ is essentially treading water, waiting to see whether a global recession bites into demand and sends oil prices tumbling, or whether western nations will implement their own sanctions on Russian oil. It is unlikely that OPEC+ will try to put together a new longer-term production deal until they have a better idea of how these factors will impact the market.

2. Nancy Pelosi’s Visit to Taiwan

The Speaker of the U.S. House of Representatives, Nancy Pelosi, visited Taiwan. She is the third most powerful person in the U.S. government. This visit is raising questions about how increased tensions between China and Taiwan would impact oil prices and the prices of other goods. An escalation of tensions between the region’s biggest power and the small nation would increase global oil prices.

First, if faced with the possibility of a military conflict, China would likely increase its foreign oil purchases. It is already the world’s largest oil importer.

Second, China could effectively control waterways in the region, including the most heavily trafficked maritime routes. China’s oil (and other products) generally flow through there, but so does the oil of other Asian countries like Korea and Japan. China could exert greater influence over the region during a military or diplomatic conflict. It would not be the first time that a regional military power has taken it upon itself to determine who can and cannot proceed through a waterway during a conflict. That would raise the price of oil.

3. Hurricane Season

This is the first week of August and the start of the height of hurricane season in the Atlantic. So far, Saharan dust and unfavorable atmospheric conditions have dampened the development of hurricanes in the Atlantic Ocean. Powerful hurricanes, especially in the Gulf of Mexico, can impact offshore and onshore oil production, petroleum imports and exports, petroleum refining, and the transportation of petroleum within the U.S. Traders should keep in mind that the U.S. government may be limited at this time in how it can respond to short-term and long-term outages, because it has already released a great deal of oil from the Strategic Petroleum Reserve to try to reduce gasoline prices before the November midterm elections. A powerful hurricane in the wrong place could cause a serious supply shortage in the U.S.

3 Things To Watch In Oil Markets
 

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3 Things To Watch In Oil Markets

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Comments (15)
Robert Flores
Robert Flores 8 hours ago
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What about europe pivoitng to oil instead of nat gas to produce energy ?
공성천 공성천
공성천 공성천 Aug 04, 2022 10:25PM ET
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ellen  r. thank you
goutham kumar
goutham kumar Aug 04, 2022 10:04PM ET
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Wald madam your article is very nice and wonderful...Your idea of how the earth's geographical changes will affect the oil market is very interesting...
Lei Yi
Lei Yi Aug 04, 2022 12:27PM ET
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Quality news, point 2 is unfortunately becoming real
Ameen Hamdy
Ameen Hamdy Aug 04, 2022 12:19PM ET
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nice
Valdemar Por
Valdemar Por Aug 04, 2022 12:18PM ET
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should we keep, hold investments in th boild companies?
Haresh Shah
Haresh Shah Aug 04, 2022 12:18PM ET
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Is it good to invest in refinery or petrolium company?
Haresh Shah
Haresh Shah Aug 04, 2022 12:18PM ET
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Is it good to invest in refinery or petrolium company
Valdemar Por
Valdemar Por Aug 04, 2022 12:18PM ET
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should we keep, hold investments in th boild companies?
Arthur Lynn
Hoppel Aug 04, 2022 9:55AM ET
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Good article, thanks.
Edwin Hermens
Edwin Hermens Aug 04, 2022 7:17AM ET
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Well writen as always. Good to have you back more frequent.
Bolseiro Bilbo
Bolseiro Bilbo Aug 04, 2022 7:12AM ET
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Best article I read this week. thanks 🙏
 
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