Energy Prospectus

I spoke at an energy conference in Dallas on Monday and drove back today. I got to listen to Trump's decision to pull out of the Iranian Nuke Deal and slap sanctions back on Iran. It will take a few months before the impact of the sanctions shows up in the supply/demand data, but it will have a significant impact.

Increased geo-political risk is important, but the supply & demand have been tightening for over a year.

"While some (traders and investors) believe that geo-political risk is the only reason for oil prices rising it is only part of the oil bull market story. Demand is the real story and it is demand mixed with underinvestment (on the supply side) that helped erase the biggest oil glut of all time. The U.S economy is doing great. Even the critics of the Trump tax cuts are now acknowledging the benefits to all Americans. The Washington Times reports that April was the best month in history for the U.S. budget, according to Congressional Budget Office figures. The federal government took in a record tax haul in April in route to its biggest-ever monthly budget surplus, the Congressional Budget Office said, as a surging economy left Americans with more money in their paychecks — and thus more to pay to Uncle Sam. All told the government collected $515 billion and spent $297 billion, for a total monthly surplus of $218 billion. That swamped the previous monthly record of $190 billion, set in 2001." - Phil Flynn

China demand for oil has been surging as well. Platts reported last week that China ended the first quarter of 2018 with robust apparent oil demand growth of 6.8% year on year, as stronger-than-expected GDP growth boosted consumption from the industrial and construction sectors and outweighed concerns over rising oil prices, S&P Global Platts calculations based on latest official data showed. Platts says that the apparent oil demand growth number for Q1 not only reflected a recovery in demand in China, but it also sent a signal that the rally in crude oil prices -- Brent crude has risen nearly 11% in 2018 -- has so far failed to make a dent on demand in Asia's biggest energy consumer. The 6.8% year-on-year GDP growth aided China's overall oil demand to rise to 12.36 million b/d in Q1, much higher than the 4.1% growth seen in Q1 of 2017. For the whole of 2017, demand growth was at 5.5% year on year.”

Venezuela

ConocoPhillips (NYSE:COP) say they will take Caribbean assets of state-run PDVSA to enforce a $2 billion arbitration award. The move is going to make it difficult for PDVSA’s to do business.

On top of that Bloomberg News is reporting that “Military officers are joining the exodus of Venezuelans to Colombia and Brazil, fleeing barracks and forcing President Nicolas Maduro’s government to call upon retirees and militia to fill the void. High desertion rates at bases in Caracas and the countryside are complicating security plans for the presidential election in 13 days, which by law require military custody of electoral materials and machinery at voting centers.”

WASHINGTON (Reuters) - President Donald Trump on Tuesday pulled the United States out of an international nuclear deal with Iran, raising the risk of conflict in the Middle East, upsetting European allies and casting uncertainty over global oil supplies.

Trump said in a televised address from the White House that he would reimpose U.S. economic sanctions on Iran to undermine

"a horrible one-sided deal that should have never, ever been made."

The 2015 agreement, worked out by the United States, five other world powers and Iran, lifted sanctions on Iran in exchange for Tehran limiting its nuclear program. The pact was designed to prevent Iran from obtaining a nuclear bomb.

But Trump complains that the accord, the signature foreign policy achievement of his Democratic predecessor, Barack Obama, does not address Iran's ballistic missile program, its nuclear activities beyond 2025 or its role in conflicts in Yemen and Syria.

Iran has extended its political and military influence in the Middle East in recent years, deeply worrying U.S. allies Israel and Saudi Arabia.

Underscoring the tension in the region, the Israeli military went on high alert on Tuesday for a possible flare-up with neighboring Syria, which is allied to Iran.

An Israeli air strike targeted a Syrian army position south of Damascus on Tuesday but caused no casualties, a commander in the regional alliance supporting Syrian President Bashar al-Assad told Reuters.

Abandoning the Iran pact was the latest element of Trump's high-stakes "America First" policy, which has led the United States to announce its withdrawal from the Paris climate accord, come close to a trade war with China and pull out of an Asian-Pacific trade deal.

Iranian President Hassan Rouhani said on Tuesday that Iran would remain in the deal without Washington.

Iranian state television said Trump's decision to withdraw was "illegal, illegitimate and undermines international agreements." < This comment for a country that openly supports terrorists.

Renewing sanctions would make it much harder for Iran to sell its oil abroad or use the international banking system.

Iran is the third-largest member of the Organization of the Petroleum Exporting Countries and pumps about 3.8 million barrels per day of crude, or just under 4 percent of global supply. China, India, Japan and South Korea buy most of its 2.5 million bpd of exports.

According to the U.S. Treasury, sanctions related to Iran's energy, auto and financial sectors will be reimposed in three and six months.

Oil prices recouped some losses after Trump's announcement, in a volatile session in which prices slumped as much as 4 percent earlier in the day.

Brent crude futures LCOc1 settled 1.7 percent lower at $74.85 a barrel, while U.S. West Texas Intermediate (WTI) crude futures CLc1 ended the session 2.4 percent lower at $69.06 per barrel.

Wall Street remained in negative territory, while energy stocks cut earlier losses after Trump spoke.

'ROTTEN' DEAL

Trump said the nuclear agreement did not prevent Iran from cheating and continuing to pursue nuclear weapons.

"It is clear to me that we cannot prevent an Iranian nuclear bomb under the decaying and rotten structure of the current agreement," he said. "The Iran deal is defective at its core."

Iran denies it has tried to build atomic weapons and says its nuclear program is for peaceful purposes. U.N. inspectors say Iran has not broken the nuclear deal and senior U.S. officials themselves have said several times that Iran is in technical compliance with the pact.

Trump said he was willing to negotiate a new deal with Iran, but Tehran already has ruled that out and threatened unspecified retaliation if Washington pulled out.

Trump's decision is a snub to European allies such as France, Britain and Germany that are also part of the Iran deal and tried hard to convince the U.S. president to preserve it. The Europeans must now scramble to decide their own course of action with Tehran.

China and Russia also are signatories to the Iran deal.

The leaders of Britain, Germany and France said in a joint statement that Trump's decision was a cause for "regret and concern."

They urged the United States not to take steps that would make life harder for other countries that still wanted to stick to the nuclear deal with Iran.

Obama described Trump's decision to withdraw from the deal, known formally as the JCPOA, as "misguided."

"I believe that the decision to put the JCPOA at risk without any Iranian violation of the deal is a serious mistake," Obama said in a statement. < Says the man who shipped $Billions to terrorists.

Iran's growing military and political power in Yemen, Syria, Lebanon and Iraq worries the United States, Israel and U.S. Arab allies such as Saudi Arabia.

Israel has traded blows with Iranian forces in Syria since February, stirring concern that major escalation could be looming.

The Israeli military said on Tuesday that after identifying "irregular activity" by Iranian forces in Syria, it instructed civic authorities on the Golan Heights to ready bomb shelters, deployed new defenses and mobilized some reservist forces.

Prime Minister Benjamin Netanyahu made a televised address lauding Trump's Iran policy and alluding to the tensions over Syria.

"For months now, Iran has been transferring lethal weaponry to its forces in Syria, with the purpose of striking at Israel," Netanyahu said. "We will respond mightily to any attack on our territory."

Saudi Arabia, Iran's arch-foe in the Middle East, also welcomed Trump's decision.