The supply side for oil does not seem to matter because the world is still focused on anemic demand, the lack of a COVID-19 relief package, and the possibility of a second wave of the coronavirus pandemic.
The OPEC Secretary General, HE Mohammad Sanusi Barkindo, said that, “oil demand still looks anemic, OPEC is hopeful that the world won’t return to deepest lockdowns.” Today’s oil price seems to agree with him because not even a very bullish supply drop in crude, gasoline, and a stunner drop in distillates, can give the market a bid.
The American Petroleum Institute (API) reported that the U.S. crude supply fell by a whopping 5.4221 million barrel. The API said that U.S. gasoline supply fell by 1.513 million barrels and a huge 3.930 million barrel drop in distillate.
Of course the market is ignoring this early today because they chalk it up all to Hurricane Delta. There is no doubt that the hurricane made the draws larger, and in the Cushing delivery point, we saw a 2.199-million-barrel increase. Yet, they ignore the broader trend of tightening supply because there is this belief that demand is not going to get better.
OPEC Secretary-General HE Mohammad Sanusi Barkindo says that he believes that oil demand is not recovering as quickly as expected. When OPEC Plus meets in November and December, they will take stock of the whole year. When he was asked about the planned OPEC plus plan to raise output next year, he said there is no cause for alarm. Tell the market that primarily as it deals with the return of Libyan oil.
Still, while demand has been not as strong as they hoped, inventories are tightening globally. Going into the fourth quarter can be an issue because an increase in demand due to a weather event could leave the complex vulnerable to price spikes.
Mr. Barkindo does say that “We will see a strong rebound in GDP next year. We have no doubt a vaccine will be available next year.” Maybe, but the U.K. sees the second wave of Covid and the U.K. Health Secretary says that the country is moving to a “high alert level.” Vitol CEO says that oil demand in the U.S. and the E.U. has passed its peak! That leaves the rest of the world to suck down the barrels.
Natural Gas is on a wild ride as the weather forecast for cold and its duration fluctuates. Today we get the EIA natural gas number at 9:30am central time and oil at 10:00am.
We have written before that you cannot tax your way to prosperity. Oppressive tax is keeping people in poverty. Bloomberg News is a must-read! They write, “Millions of low-income Americans are locked into poverty thanks to U.S. tax policy, Federal Reserve Bank of Atlanta researchers say. About a quarter of lower-income workers effectively face marginal tax rates of more than 70% when adjusted for the loss of government benefits, a study led by Atlanta Fed Research Director David Altig found. That means for every $1,000 gained in income, $700 goes to the government in taxes or reduced spending. In some cases, there are no gains at all.
Poorer families may rely on Medicaid insurance, welfare payments, food stamps, housing vouchers and tax credits that are based on family incomes. Small increases in wages can bring big losses of benefits, reinforcing a negative cycle in which workers aren’t rewarded if they improve their skills or pay.
“This is a perverse incentive that says you shouldn’t try to make yourself better,” said Atlanta Fed President Raphael Bostic, who is leading a virtual conference Thursday intending to focus attention on the problem.
“They are not dumb. It’s on us to actually change those incentives so that people understand what the potential is and move forward towards opportunity.” According to the U.S. Census Bureau, 34 million Americans lived below the poverty line last year.