Energy Report: Rubber Room

Oil traders both bullish and bearish have been bounced around in recent days like they are locked in a rubber room. Since the break of the sharp oil uptrend, prices have whipsawed driven by headlines and fear. Fear of rising covid cases that may hurt demand and fears that the Biden administration infrastructure plan may never pass. The restarting of the Iranian nuclear accord talks seemed to go ok according to sources from Iran, but it appears that both sides are still far apart as far as the lifting of U.S. sanctions. Yet already Iran is selling oil to China without any fear that the Biden administration will try to enforce sanctions while they try to get Iran back in the 2015 accord. At the same time, geopolitical risk factors are rising. There are signs that Russia may soon get into a conflict in Ukraine and a shadow war between Iran and Israel heat up.

Pump Jack, Oilfield, Oil, Fuel, Industry, Petroleum

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The Wall Street Journal reports that "An Iranian ship thought to be used by Iran’s elite military force was attacked Tuesday near Saudi-Yemeni waters, both U.S. and Iranian officials said, in an apparent escalation of a conflict between Iran and its regional foes. The attack of the ship, believed by U.S. officials and others in the region to be used for intelligence collection by Iran’s Islamic Revolutionary Guard Corps, was attacked Tuesday in the Red Sea, officials said. The attack came as international talks to revive a nuclear accord between Iran and the U.S. started in Vienna. It came after revelations last month, reported by The Wall Street Journal, that Israel has been targeting ships carrying fuel and weaponry from Iran to Syria for about the past 18 months. At least a dozen ships have been targeted, according to the Journal report. Oil traders must wonder how long this shadow war stays in the shadows. The risk of more of an escalation could prove to be an increasing risk factor for the global oil supply.

The American Petroleum Institute (API) report seemed to raise more questions that it answered. The API reported that crude oil supply fell by 2.618 million barrels yet a shocking 4.553-million-barrel increase in gasoline supply had traders scratching their heads. Distillates reportedly increased by 2.810 million barrels. The Energy Information Administration will release their version of the report and I expect that it will look much different than the API.   

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