All Dressed Up

Oil is all dressed up but apparently has nowhere to go. Oil is getting hit with a bad case of the summer doldrums as it tries to balance geopolitical risks and falling supply versus worries about global oil demand growth. Oil is also looking at signs that the U.S. is working to defuse global geopolitical tensions, keeping a lid on prices. Even with the fact that we had a geopolitical risk missile show in the last 48 hours.

First, it was North Korea shooting off a new type of missile that they said was a warning to the warmongering South Korea. Then you had Iran showing its missiles off.

Fox News reported that Iran successfully test-fired a medium-range ballistic missile Wednesday; which flew more than 600 miles from the southern part of the country to an area outside the capital Tehran in the north. “We are aware of reports of a projectile launched from Iran, and have no further comment at this time,” a senior U.S. administration official told Fox News Thursday evening.

Still despite that Reuters reported that U.S. Secretary of State Mike Pompeo said in a television interview on Thursday that he would go to Iran for talks if it was necessary, amid tensions between Tehran and Washington. Asked if he would be willing to go to Tehran, Pompeo said in an interview with Bloomberg TV: "Sure. If that's the call, I'd happily go there ... I would welcome the chance to speak directly to the Iranian people."

The U.S. also downplayed the North Korean missile launch and said that nuclear missile talks could start in a few weeks.

Kim said the test was “a solemn warning to the south Korean military warmongers” and accused South Koreans of “double-dealing” for saying they support peace but simultaneously importing new weapons and conducting military drills, according to Reuters. South Korea’s leader should stop such “suicidal acts” and “should not make a mistake of ignoring the warning,” Kim said. Reuters reported that the United States on Thursday urged North Korea to refrain from further provocations after the communist country test-fired two new short-range ballistic missiles and said it still hoped for a resumption of working-level talks on North Korea’s denuclearization.

For oil traders, this is going to be a game of patience. Big picture, barring any bad economic news, I still believe oil prices are near the low of the year. Rig counts should fall again today and that should support prices. Global economic stimulus, even though ECB Mario Draghi seemed to disappoint, will juice up energy demand as it always does. Maybe Draghi was afraid of Trump and decided to leave the heavy cutting to Christine Lagarde? With all the geopolitical risk factors on the table, the trade will be reluctant to carry shorts over the weekend.