Oil prices are pulling back thanks to a “peace dividend” – along with rumors of an OPEC production hike at the group’s July 6 meeting. Indeed, the historic positive momentum towards peace in the world could be the biggest story in the energy markets this year, writes Phil Flynn, senior energy analyst at The PRICE Futures Group.
The neutralization of Iranian nuclear sites by the US military may promote peace in other regions worldwide. Oil prices are already benefiting from the reduction of the war premium, and further geopolitical risk premiums may need to be removed.
United States Oil Fund (USO)
This comes as OPEC is meeting July 6 and signaling that they may increase production. The latest news that we’re hearing is that Russian vice minister and oil guide Alexander Novak said that OPEC may – and I stress the word MAY – talk about a production increase. Or they may talk about football or recent movies.
Another slightly bearish story came out of Reuters. Reuters is reporting the US will not complete scheduled deliveries of crude oil into the Strategic Petroleum Reserve until the end of the year due to maintenance. That would be as much as seven months behind schedule.
Finally, could we have just seen a “capitulation injection” in natural gas? Gas got blindsided with a much-higher-than-expected 96bcf injection into storage – even though we’ve seen scorching temperatures in many parts of the country. Still, supplies are 196 Bcf less than last year.
Total working gas stands at 2,898 Bcf, aligning with the historical range observed over the past five years. But it may be hotter than the five-year average – and demand for LNG exports will break records. So, at the end of the day, if we stay hot, we will see storage evaporate.
