[Thanksgiving] Trump single-handedly reducing crude prices

We must give thanks to Lord Trump for this kind gift he has bestowed upon us. Thank you Jesus Trump for your generosity.

https://www.cnbc.com/2018/11/13/why-oil-prices-tumbled-from-four-year-highs-into-a-bear-market.html

The oil market is undergoing a stunning reversal as crude futures wipe out this year's gains after hitting their highest levels since 2014 just six weeks ago.

The slump reflects a fundamental change in the outlook for the oil prices. A month ago, traders were concerned that a looming shortage of oil would push crude futures to $100 a barrel. Now, supply is expected to swamp demand at the start of 2019.

As a result, oil prices have plunged more than $20 a barrel since the start of October, when Brent crude rose to nearly $87 a barrel and U.S. crude traded just shy of $77. Both benchmarks are now trading firmly in bear market territory, having fallen more than 20 percent from their 52-week highs.


Along the way, U.S. crude has posted its longest losing streak since it began trading in New York more than three decades ago. The contract has now fallen for 12 consecutive sessions. It settled at $55.69 on Tuesday, its lowest closing price since Nov. 16, 2017.



The roots of the pullback can be traced back to the most recent rally itself. At the peak of the run-up, many energy analysts said oil prices never should have risen so far so fast.

Crude futures rose to four-year highs on Oct. 3 as the market braced for renewed U.S. sanctions on Iran, OPEC's third biggest producer. Through September, the threat of sanctions wiped about 800,000 barrels a day off the market, fueling speculation that some oil importers would struggle to find supplies.

Stock market sell-off
That left oil prices vulnerable to a pullback just as the stock market was about to sell off. One week after crude futures struck their highs, two-thirds of the stocks in the S&P 500 plunged into correction territory.

That kicked off a broad market rout that saw investors shed risk assets, including crude futures. Oil and stocks do not always move in tandem, but the assets were closely correlated during last month's sell-off.

Right around the same time that investors started dumping stocks and commodities, concerns about faltering oil demand sharpened.

Weaker consumption outlook
In October, both OPEC and the International Energy Agency said oil consumption would grow less than previously forecast, pointing to signs of slowing global economic growth due to trade tensions, rising interest rates and weak emerging market currencies.

The U.S. dollar has risen nearly 3 percent against a basket of currencies over the last two months. That makes crude oil, which is sold in dollars, more expensive to holders of other currencies.

Rising output
Meanwhile, the world's top three oil producers are pumping at or near all-time highs and the 15-member OPEC cartel is in the middle of a coordinated production increase.

U.S. output has topped 11 million barrels per day in recent months, while Russia is pumping at post-Soviet era highs at roughly the same level. Saudi Arabia has trailed just behind at 10.6 million bpd in October.

The rising output and weakening demand outlook now has much of the market convinced that supply will outstrip the world's appetite for oil early next year.

Iran waivers
The Trump administration's decision to allow eight countries to continue importing Iranian crude for the next six months has also relieved downward pressure on oil prices.

With demand growth looking shaky and oil prices collapsing, OPEC and its allies are now considering a fresh round of output cuts.

The cartel, along with Russia and several other producers, began capping their output in January 2017 to drain a global crude glut and end a punishing oil price downturn. However, they agreed to reverse course and hike output in June after cutting output more than they intended.

Last month, a committee representing the group said the alliance may have to once again throttle back output to prevent oversupply. The group essentially reiterated that position at its latest meeting on Sunday. The following day, Saudi Arabia's energy minister said the group believes an output cut approaching 1 million bpd may be in order.

Still, oil prices continued to move lower on Tuesday, after President Donald Trump urged OPEC and Saudi Arabia to stay the course and as Russia's energy minister continues to express skepticism about the wisdom of supply cuts.

 

https://www.cnbc.com/2018/11/15/trump-duped-saudis-into-tanking-oil-prices-analysts-say.html

'Duped,' 'tricked' and 'snookered': Oil analysts say Trump fooled Saudis into tanking crude prices

• Oil markets analysts say it appears that the Trump administration tricked Saudi Arabia and other oil producers into slashing oil prices.
• President Donald Trump pressured the Saudis to orchestrate a production increase ahead of U.S. sanctions on Iran.
• The Trump administration threatened to cut Iran's exports to zero, but ultimately allowed some of its biggest buyers to continue importing crude.

Earlier this year, Saudi Arabia pulled off a challenging U-turn in global oil market policy, convincing a fractious group of two dozen nations to hike output and undercut the oil market rally that was filling their coffers.

The Saudis undertook this unpopular task at least in part to help its allies in the White House — and for its troubles, the kingdom was rewarded with a series of blistering tweets from President Donald Trump and the biggest pullback in oil prices since the historic downturn of 2014.

Oil market analysts say it now appears that Trump hoodwinked Saudi Arabia, fooling the U.S. ally into pushing the oil market into oversupply and sparking a roughly 25 percent drop in crude prices. That accomplished Trump's goal of driving down energy costs for Americans, but left nations dependent on oil income like Saudi Arabia with the prospect of shrinking revenues.

The analysts say Trump essentially bamboozled the Saudis by threatening for months to implement sanctions against Iran so strictly, the Islamic Republic's exports would go into free fall. But when the administration's deadline for oil buyers to quit Iranian oil arrived on Nov. 4, Trump instead dolled out six-month exemptions to some of the country's biggest customers.

"They got sort of tricked here," said John Kilduff, founding partner of energy hedge fund Again Capital. "The Russians and the Saudis in particular ramped up production, ramped up exports ahead of what was supposed to be severe sanctions on Iran, and when the administration gave the eight waivers to Iran's largest buyers, it undercut that whole equation."

"So now we've tripped into an oversupply situation almost overnight because of the severe reaction by Russia and the Saudis to cover for Iran losses, which never materialized."

To be sure, the sanctions have shrunk Iran's exports by about 1 million barrels per day. Few thought the Trump administration would actually achieve its stated goal of cutting its rival's shipments to zero.

But the sanctions, backed by the administration's hawkish rhetoric, cut Iran's exports more quickly than many anticipated. The market also expected another big drop after the Nov. 4 deadline passed. That fear fueled a rally that sent oil prices to four-year highs.

Over the last six weeks, that rally has unwound in spectacular fashion, with oil prices tumbling into a bear market. The pullback has several causes, including a weaker demand outlook for crude and a wider market sell-off, but analysts say OPEC's output hike earlier this year and the sanctions waivers play a major part in the oil price plunge.

"In early October there was this expectation that a lot of Iran's barrels were going to come off the market, and so essentially Saudi Arabia was duped into increasing production," said Matt Smith, head of commodities research at tanker-tracking firm ClipperData.

Smith says it's uncertain the situation has unfolded exactly as the Trump administration intended, but it has ultimately worked out in the president's favor — though potentially at a cost to U.S.-Saudi relations.

"They've really done a good job of decreasing that oil price, but it has been at the expense of some of those relations there, because surely the Saudis have got to be pretty unhappy with the way things have played out here."

Saudi Energy Minister Khalid al-Falih acknowledged this week that Iran's exports didn't fall as much as expected.

He also announced that Saudi Arabia will ship 500,000 fewer bpd in December and said OPEC and its allies may cut production by 1 million bpdnext year. That decision could come in a few weeks when OPEC, Russia and other producers meet to review their current policy of easing output curbs that have been in place since last year.

Trump took to Twitter a few hours later, tweeting, "Hopefully, Saudi Arabia and OPEC will not be cutting oil production. Oil prices should be much lower based on supply!"

The president has previously used Twitter to blame OPEC for high oil prices and demand the group take action to cut costs. At the U.N. General Assembly this year, he told world leaders that OPEC is ripping them off.

Analysts say Falih's comments this week might have pushed oil prices higher, if not for Trump's tweet.

"I think the market is ignoring [the Saudis] because of Trump," said Helima Croft, global head of commodity strategy at RBC Capital Markets. "I think if you didn't have the Trump tweet, there would not be this skepticism. Right now, there's a view that the Saudis will reverse course because of Trump. There's a sense that Trump really has them over a barrel at this point."

The kingdom is in a precarious position after a Saudi prosecutor acknowledged that government agents killed journalist and U.S. resident Jamal Khashoggi in the Saudi Consulate in Istanbul last month, following earlier denials by the state.

Gary Ross, CEO at Black Gold Investors, believes the cartel will ultimately agree to cut output when it meets with Russia and other producers next month. However, in his view it may be too little too late.

"They're pretty much snookered by Trump," Ross said. "I mean, Trump led them to believe that the Iranian exports would be zero. It turned out they're going to be 1.2 to 1.5 million barrels a day, way higher than people thought."

"Broadly speaking, it's an oversupply story, and I think they will cut back, but they're not likely to cut back enough to drive prices back up to anything like $80 Brent," he told CNBC. "I think we're going to be in a $60 to $70 Brent market for some time."

The White House did not immediately return a request for comment.

 

Trump did this for you DD. He loves all his children. HAPPY TRUMPSGIVING!

 

Vaya con Dios!

Good news for American producers!

Thank you Trump for making OPEC give up more market share to our powerful American energy producers!

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