OPEC claims to have U.S. fracking producers’ back, though recent weakness is the product of concerns regarding the Chinese economy according to Phil Flynn.
After opening with a bit of optimism about progress in the U.S.-China trade talks in the Sunday night session, crude oil quickly reversed course on weak economic data from China. China’s December exports fell by 4.4% from last year, the biggest drop in two years. Chinese imports also plunged by 7.6%, the biggest drop since 2016.
This is raising concerns of slowing global growth especially after weak industrial output data from Europe. It also raises the question of whether or not the Chinese stimulus, that has been announced, will be enough to ward off a major slowdown in the Chinese economy.
At the same time, it puts more pressure on China to get a trade deal with the United States. That might be a bit harder after China reported that its trade surplus with the United States increased by 17% from last year, coming in at $323.32 billion in 2018. That, according to Reuters, is the highest level since 2006. Exports to the United States increased by 11.3% while U.S. imports to China rose 0.7%.
Bottom line, China needs a deal if they are interested in stopping the free fall in their economy. While some argue they are playing the long game when it comes to this trade war, they really are going to have a hard time recovering if they let this linger much longer.
In the meantime, OPEC over the weekend was congratulating themselves for saving the global oil market and telling us that they were the shale oil producer’s best friend. In fact, if you don’t like OPEC, then just try to imagine a world without OPEC. It’s easy if you try. That’s what OPEC wants you to do.
The Wall Street Journal reported that: “Two of OPEC’s most powerful voices defended the oil cartel’s record Monday, saying it wasn’t at risk of disbanding. The statements came in response to revelations late last week that a Saudi-funded research effort is exploring how a possible OPEC breakup might impact oil markets. The research effort, first reported by The Wall Street Journal, follows several recent accusations by President Trump that the 15-nation organization is driving oil prices higher.
At an energy-industry conference that began on Monday, Suhail al-Mazroui, the Emirati energy minister who also holds OPEC’s rotating presidency, said that without OPEC, “there will be chaos. Some people think things will be better if OPEC doesn’t exist. Things will be way worse,” he said, because oil markets would be unstable. So, you got that going for you.
S&P Platts reports that OPEC has thrown a lifeline to U.S. shale producers by cutting output to boost oil prices, Saudi energy minister Khalid al-Falih said Sunday, rejecting the notion of a market share battle.
“I can tell you that many [U.S. shale producers call me when they see that price trend going down and when they see investors starting to turn away, and they say it's time to do something," Falih said at an Atlantic Council energy forum in Abu Dhabi. "Of course, they want us to do all the work. They want to take the benefit. But that's, you know, that's life.”
The Wall Street Journal reported that President Trump’s National Security Council asked the Pentagon to provide the White House with military options to strike Iran last year, generating concern at the Pentagon and State Department, current and former U.S. officials said. The request, which hasn’t been previously reported, came after militants fired three mortars into Baghdad’s sprawling diplomatic quarter, home to the U.S. Embassy, on a warm night in early September. The shells—launched by a group aligned with Iran—landed in an open lot and harmed no one.
But they triggered unusual alarm in Washington, where President Trump’s national security team, led by John Bolton, conducted a series of meetings to discuss a forceful U.S. response, including what many saw as the unusual request for options to strike Iran. “It definitely rattled people,” a former senior U.S. administration official said of the request. “People were shocked. It was mind-boggling how cavalier they were about hitting Iran.”
Natural Gas
Winter is back and so is natural gas. Andrew Weisman, of EBW Analytics, writes that as of Sunday night, NYMEX natural gas appeared set to rise sharply on Monday. Over the weekend, major weather service providers added 32.97 gHDDs in the 15-day forecast window and continued to add degree days through the end of January. The move up for gas triggered by this gain will not be as steep as it would have been if it had occurred earlier this month. If the degree day gain holds up on Monday, though, the February natural gas contract could challenge resistance at $3.38/MMBtu or higher.
The return of colder-than-normal weather along the Atlantic Coast should bolster regional power demand and support higher local day-ahead electricity prices. Current forecasts favor an extended bout of below-normal temperatures for the eastern United States.
For oil and products, we are at the mercy of outside markets. This comes as more reports of a clogged Houston Shipping channel as super tankers slow U.S. oil exports. The Channel may need to be expanded so U.S. oil and product exports could be slowed.
