Don’t count your barrels before they are pumped. Crude traders might be reminded of that old-adage having to do with chicken and eggs or whatever came first when it comes to counting barrels of future oil supply. As oil prices in the U.S. languished over fears of another supply increase and today WTI option expiration, Brent crude rallied on a Platt’s report that talks between Saudi Arabia and Kuwait, over two shared oil fields, had broken down after months of promise, shutting in some 500,000 b/d of anticipated oil production for the foreseeable future, sources close to the projects told S&P Global Platts. This was disappointing because many were hopeful that this supply would have been brought on line quickly to replace the impending loss of Iranian barrels next month. It is also more intriguing because it comes as Saudi Arabia and mainly Crown Prince Mohammed bin Salman is coming under more scrutiny because of the murder of Jamal Khashoggi.
In fact, according to the Platts report, the Crown Prince was involved in the talks with Kuwait that broke down. Platts said workers involved in the Neutral Zone fields' restart are no longer optimistic that any resolution will occur, the sources said, as a recent meeting between Saudi Crown Prince Mohammed bin Salman and Kuwaiti Emir Sabah al-Ahmed failed to resolve issues of sovereignty over the long-contested area. "Dead as a doornail," a source said, of prospects for the fields' return, adding that the only hope may be through international arbitration. "It will not be easily fixed," another source said of the dispute.
The Crown Prince is not really known for his diplomacy skills. If you remember, MBS as he is called, angered all the OPEC members and Russia when he reneged on a deal to cut production in Doha in April of 2016 when Russia and all the other counties flew there to sign the deal. He later fired the Saudi Oil minister Ali Naimi and of course later arrested members of the Royal family. Now many are accusing him of the murder, but as President Donald Trump points out you are innocent until proven guilty. The President told the AP “Here we go again with you know you’re guilty until proven
Innocent.” Associated Press, “I don’t like that. We just went through that with Justice Kavanaugh and he was innocent all the way as far as I’m concerned. So, we have to find out what happened.”
Also, when it came to oil expectations, the markets were counting other barrels that were not hatched, at least according to the American Petroleum Institute (API). The API reported a 2.13-million-barrel drop in crude supplies defying calls for a build. The API also reported a surprising 3.42-million-barrel drop in gasoline supply and a 246,000-barrel drop in distillate, which are still the soft spot in the entire petroleum complex.
Still, WTI action is muted as we have heavy option expiration. Once we get through that, and if the Energy Information Administration (EIA) does not come out with bearish data, the lows for oil should be in, based on sanctions, low spare production capacity and a U.S. economy that continues to soar.
Trumponomics is working. For example, the comeback in U.S. steel that the naysayers said was an impossibility Reuters reports that United States Steel (NYSE:X) workers are set to get the biggest wage jump in at least six years under a new deal negotiated with the company, providing early signs that gains from U.S. President Donald Trump’s clampdown on imports are finally trickling down. The agreement, reached on Monday, proposes a cumulative 14 percent wage increase over a four-year period, three sources familiar with details of the negotiations told Reuters on Tuesday. Wages were frozen in the last contract, which ended on Sept. 1, as the Pittsburgh-based company was suffering losses from a slump in the domestic steel prices. The 2012-2015 agreement raised wages by an average of about 1.5 percent per year over three years, according to the workers’ union.
Take the JOLTS jobs survey. The Bureau of Labor Statistics' Job Openings and Labor Turnover (JOLTs) report, which showed a record 7.14 million jobs openings in August.
And finally, the Wall Street Journal reports that the” U.S. is back on top as the most competitive country in the world, regaining the No. 1 spot for the first time since 2008 in an index produced by the World Economic Forum, which said the country could still do better on social issues. America climbed one place in the rankings of 140 countries, with the top five rounded out by Singapore, Germany, Switzerland and Japan. All five countries’ scores rose from 2017, with the U.S. notching the second-biggest gain after Japan’s. The top spot hasn’t gone to the U.S. since the financial crisis stalled output and triggered a global economic slowdown.” All of this of course is bullish for oil demand expectations