Oil prices are on the rise as President Trump warns the world that anyone trading with Iran will not be trading with the USA. That pronouncement is directed at the EU who yesterday said that "We deeply regret the re-imposition of sanctions by the U.S., due to the latter's withdrawal from the Joint Comprehensive Plan of Action (JCPOA)," the statement issued in Brussels said. Yet, the tough talk may have changed some minds a bit after Iranian President Hassan Rouhani said he would welcome talks with the U.S. "right now." "I don't have preconditions. If the U.S. government is willing, let's start right now.”

Yet, at the same time, Rouhani said that “If you’re an enemy and you stab the other person with a knife and then you say you want negotiations, then the first thing you have to do is remove the knife.” He also wants the U.S. to apologize for past actions against the Iranian people. I think if he is waiting for President Trump to apologize, he had better just wait for hell to freeze over.

China has turned to Iran to replace U.S. crude, but what is Iran to profit if they gain China and lose India? Reuters is reporting that U.S. crude oil producers appear to have found an alternative buyer for cargoes no longer heading to China, with India on track to import record volumes in August.

India has booked a total of 9.94 million barrels of crude, about 319,000 barrels per day (bpd), to arrive from the United States this month, according to vessel-tracking and port data compiled by Thomson Reuters Oil Research and Forecasts. This would be almost triple the 119,000 bpd India imported from the United States in July, and well above the 190,000 bpd for November last year, the previous record for a month.

Oil bears have received a reality check. Shale oil output is slowing, and pipelines are full. Saudi oil production fell, raising concerns about their ability to replace Iranian oil. The oil supercycle, that we told you was born in 2014 and 2015, is on full display. Normal seasonal weakness is overshadowing on what will turn out to be one of the tightest winter markets we have seen in over a decade. This as the oil market gets prepared for what should be a very bullish American Petroleum Institute (API) report.

Last week, we saw a surprise increase in oil supply as U.S. oil exports tanked. This week, we are looking for a big increase in U.S. oil exports. In fact, we may hit a record as we may get two weeks of exports for the price of one. Data from Genscape put Cushing Storage at  24,445,733 million barrels. That is down 1,255,176 million barrels from July 27^th and down 125,680 from last Tuesday. That, along with an increase in oil exports, should give us at least a 3.3 million barrel supply.

U.S refiners are racking up the profits. In today’s Wall Street Journal it is being reported that “American fuel makers are posting their best second-quarter profits in years, thanks to soaring domestic oil production and regional pipeline bottlenecks that are allowing them to buy crude on the cheap.

Refining companies typically suffer, as oil prices rise because drivers scale back their travel, reducing demand for gasoline and diesel. But record U.S. production, coupled with insufficient pipeline capacity in Canada and West Texas, has depressed the cost of oil in many parts of the country, even as oil prices have been rising in general. That has boosted margins for many stand-alone refiners, propelling some, including Phillips 66 and Marathon Petroleum Corp., to their highest second-quarter profits on record. Phillips 66, the largest independent refiner, earned an average of $12.28 per refined barrel during the second quarter, up from $8.44 for the same period last year. The company reported profits of $1.3 billion, up 143% from 2017's second quarter. Marathon Petroleum earned $15.40 per refined barrel, compared with $11.32 a barrel in the year-earlier period. Its second-quarter profit rose 118% to $1.1 billion. Both companies seized on the favorable economics by operating their facilities at full capacity. A must read in the Journal.