Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

The Energy Report For May 05, 2018

Published 05/30/2018, 08:33 AM
Updated 07/09/2023, 06:31 AM

Crisis Real and Imagined

Oil prices are trying to stabilize as the market is reeling from the seasonal peak in the gasoline switchover, a potential rise in OPEC and Non-OPEC production and sanctions on China. Tough talk on NAFTA negotiations as well as a created political crisis in Italy.

Already Italian markets are bouncing back after the political drama and fears that a populist upswing in the country could lead to Italy leaving the Eurozone. While anything is possible, the point at which Italy could even think about an exit, because of the deep debt and the precarious strength of their banks, would make an exit out of the EU unthinkable. Besides, unlike previously with the Greek exit we now have a Central Banker Mario Draghi that has already sated he will do whatever it takes to save the Euro.

Reuters reported that an Italian election at this point would also be a de facto referendum on Italy’s euro membership, evoking memories of the 2011-2012 euro debt crisis and carrying huge implications for the single currency, whatever its outcome. However, reports that the two anti-establishment parties were again renewing efforts to form a government rather than force the country back to the polls, helped Milan-listed equities snap a five-day losing streak.

OPEC’s nice but futile promise to raise oil production by a million barrels a day may make the market feel better, but it is not going to be enough to fill the supply void. Global markets remain tight and we are seeing a big correction in what is a longer-term bull market. It may take a few more days for oil to get its sea legs but it may come sooner as the American Petroleum Institute should report another drop in U.S. oil inventory. Last week the API reported a draw but the Energy Information Administration reported a shock increase. Both agencies should show substantial drops in supply this week.

Trade war on again? Commerce Secretary Wilbur Ross will visit China later this week for talks, but they will be conscious as the Trump Administration already laid down the hammer. The Wall Street Journal reported that the White House said Tuesday that it would announce by June 15 a final list of $50 billion in imports from China that would be subject to tariffs of 25%, with the duties implemented “shortly thereafter.” Planned investment restrictions aimed at preventing Chinese acquisition of U.S. technology would also be announced by June 30, the White House said in a statement. The tariffs on $50 billion in Chinese imports is the first tranche in a package that the White House said could lead to tariffs on a total of $150 billion in Chinese imports.

Fear of a trade war could hurt demand for oil. This comes after China has been encouraging their refiners to buy U.S. crude oil.

Bloomberg is reporting that Canadian Prime Minister Justin Trudeau has a message for Donald Trump on Nafta: Canada would rather see a trade deal die altogether than accept certain hardline demands. Trudeau said he believed a win-win-win deal was still possible in ongoing North American Free Trade Agreement talks. U.S. Trade Representative Robert Lighthizer met Canadian Foreign Minister Chrystia Freeland earlier Tuesday in Washington to discuss the trade pact.

“No Nafta is better than a bad deal, and we’ve made that very clear to the president,” Trudeau said Tuesday in Toronto in an interview with Bloomberg’s Stephanie Flanders, ahead of the Group of Seven summit that Canada will host next week. “We are not going to move ahead just for the sake of moving ahead.” NAFTA breakdown could further reduce demand expectations for oil.

These markets are really moving so it is now more important than ever to stay tuned to the Fox Business Network! Check your cable listings.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.