Welcome to Crude Oil Today, my brief look at what's happening in oil markets and what it might mean for prices.
As ever, feedback welcome
The combination of chat that the US could tap the SPR, Steve Mnuchin suggesting exemptions on Iranian oil for a transition period, the reopening of Libyan oil ports, and the potential for increased Saudi and Russian production weighed on sentiment which in turn saw WTI and Brent fall more than 4% to $68.08 and $71.89 respectively. Of note, the Brent move looks like a huge break.
The big news, huge really when you think about rising production in Saudi Arabia, the lifting of force majeure in Libya and reopening of the recently closed ports, was that US Treasury Secretary Steve Mnuchin said the US wants everyone to go to zero Iranian imports BUT that exemptions could be made for those who can’t get there by the deadline.
Mnuchin said, "We want people to reduce oil purchases to zero, but in certain cases, if people can't do that overnight, we'll consider exceptions". Which is important given that on Friday he also said "The State Department has the ability to issue waivers around significant reductions in the oil markets, that's something that Treasury and State will be doing".
Both statements highlight the bind the US Administration is in as it tries to prosecute two arguments which are at odds simultaneously.
It might also highlight that the US Administration has another glass jaw.
Just like the big 500 point fall in the Dow a few weeks back saw Mnuchin and Peter Navarro hit the wires talking up the outlook and trying to stem the falls, so to the fact that President Trump wants Iran cut off but lower oil prices is clearly an issue that’s difficult to reconcile.
Of course that’s why the talk of tapping the SPR surfaced late last week. It’s the natural impact of having two incompatible goals. Taken together Mnuchin’s comments and the kite flying on the SPR suggest that the Administration is serious about driving oil lower. Traders notice and Brent – in particular – made a huge break last night.
I’m targeting the mid $66 region at a minimum now for Brent. This is a big break.
Have a great day's trading.
Chief Market Strategist
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