Oil Prices Are Rising

The despicable and horrendous terror attacks in Barcelona Spain are being felt by global markets that are sinking because of the lack of respect and tolerance for our fellow man. Markets also fear the fallout from the abandonment of President Donald Trump because of his comments on the senseless murder caused by a driver in Charlottesville as fears that his economic agenda will be put on hold and more of his staff may abandon him. Whether it is hatred or killing or just not wanting to hear another person’s point of view, the extremist views are hurting everyone, not only the markets but the entire human race. We need to debate or points of view with intellect and respect, not with mobs, protests and violence and hate.

Oil prices are rising after Genscape reported that supplies in Cushing, Oklahoma suddenly plunged by one million barrels. This is adding to the perception that the physical oil market is tightening much faster. Brent spreads driving the market into contango is signaling that demand is exceeding short term supply. Historic draws in US inventories are signaling the same thing. Oil supply in the US is back below 2016 levels.

Supplies should tighten even more as US crude imports, especially heavy crude, could be retrained by politics and Mother Nature. Reuters is reporting that a tanker carrying a cargo of about 1.0 million barrels of Venezuelan heavy crude has been stranded for more than a month off the coast of Louisiana for lack of a bank letter of credit to discharge. The cargo's fate adds to state-run oil company PDVSA's precarious financial position. Revenue from the company's oil sales, which have suffered because of low prices and declining production, account for more than 90 percent of the nation's exports.

Reuters says that major banks are cutting exposure to Venezuela as a result of political upheaval in the South American country. Some have closed accounts linked to officials of the OPEC member who have had sanctions leveled against them by the U.S. government and have refused to provide correspondent bank services or trade in government bonds. Signs of supply tightness have started appearing in the United States, the world's biggest oil consumer.

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