Oil Price - July 29

dan_s · Post by **dan_s** » Mon Jul 29, 2019 8:09 pm

This is the 3rd trading day in a row that WTI closed slightly higher. It looks like a consolidation around a strong support level at around $57/bbl. What's encouraging is that WTI has been drifting higher even with a strengthening U.S. dollar.

See: https://www.marketwatch.com/investing/index/dxy

The resumption of trade talks with China was one analyst's reason for higher oil prices: Top trade negotiators from the US and China are meeting for the first time in almost three months on Tuesday to try and do a deal, but expectations are low. Any progress on an agreement to end the "Tariff War" will send the markets and oil prices higher.
See: https://www.bbc.com/news/business-49148685

Obviously, the British sending more warships to the Persian Gulf should increase the geopolitical risk premium. My take is that Iran is being hammered by the U.S. sanctions. They know they cannot win a war with the U.S., but they also are too proud to give in easily to the twelve demands that the U.S. has made. There is significant risk to the global oil market if a shooting war starts. Having more warships in and around the Strait of Hormuz definitely increases the chances of military conflict. There are lots of Iranian "wackos" piloting those gunboats and it only takes one to start shooting.

I'm seeing more and more evidence that U.S. oil production growth has stalled. Last Wednesday's EIA Petroleum report showed a million barrel per day drop in U.S. oil production from the week ending July 5 to the week ending July 19. See slide 4 of my July 27 podcast. Most of the decline was a result of Hurricane Berry shut-ins. I'm sure traders will be looking carefully to see if production bounces back during the week ending July 26.

There are two new tropical waves heading across the Atlantic Ocean that may turn into Tropical Storms or hurricanes.
Watch the daily weather updates here: https://www.weatherbell.com/premium/

The number of rigs drilling for oil continues to fall and my take is that we are already past the point where we are drilling enough wells to raise production.

There is lots of "noise" pulling on the oil Bulls and Bears, but the supply/demand fundamentals are extremely bullish IMO. We are going to cover them one by one at our July 31st luncheon.