The odds are rising that OPEC plus will raise production as reports are coming in that demand is rising faster than had been anticipated. Global oil markets start a new month after a complex set of challenges created some incredible volatility in August. 

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As traders start to come back from the summer holidays, they will be faced with an oil market that is seeing mixed signals from the global demand outlook. On the one hand, global demand is at a point where inventories are falling by roughly 2,000,000 barrels a day but on the other hand, there are fears of the possibility of demand destruction from the delta variant of the covid 19 plague. Yet the hard-core demand numbers and the fact that the global market is currently undersupplied is one of the reasons why OPEC plus, more than likely, will follow through with their agreed-upon 400,000 barrels a day production increase in September.

Yet there has been some talk that OPEC plus is a little bit concerned about their oil demand forecast and the potential risk from covid-19. OPEC still sees a global supply versus demand deficit so even if they raise production at this meeting perhaps next year we’ll see very little from them. Reports overnight show that members in the OPEC cartel may re-evaluate their 2022 oil demand growth forecast of 4.2 million barrels a day from a previous forecast of 3.28 million barrels a day. This comes after the OPEC joint technical committee (JTC) said that they expect that OECD oil stocks will remain below the 2015 to 2019 average until May of 2022. That is further out than their previous forecast when they expected that oil stocks would be below average only until January of 2022.

OPEC is trying to gauge how the lockdown of China for the first three months of August will play out. China now is reopening its economy which could mean that demand will surge and what's weird is that even as China's demand faltered in August, global inventories continued to fall. One of the reasons may be U.S. oil demand that surged to pre-pandemic levels. The Energy Information Administration said that U.S. oil demand was at 20.537 mbpd in June, up by 2.959 mbpd or 16.8% y/y, down 117 bpd or 0.6% versus June 2019. 

For the price of crude oil, I believe this comes down to whether or not OPEC is going to error on the side of keeping the global market undersupplied. What that will mean is that global inventories will probably continue to fall which will give us a very bullish outlook long term. In the short term, of course, we are looking to the tragedy in the Gulf Coast.

New Orleans and Mississippi continue to try and get a gauge as to when things can start getting back to normal. A report yesterday showed that there was little progress in bringing back online gulf oil and gas production that will probably improve today we still have 13% of the U.S. refining capacity offline, 2.3 million barrels a day of capacity because of 9 shut refineries. The good news is that the Colonial pipelines are up and running and that's a moving product. I believe this is going to cause a lot of problems for inventories in the coming weeks but our sense of the underlying demand in the United States and around the world is going to mean that we're going to see a pretty explosive move to the upside at some point in the price of oil.

We have the same type of outlook on natural gas. Tight supplies of LNG in Europe is going to keep U.S. exports high and desirable. U.S. production continues to falter as demand grows so we have a very bullish outlook for winter.

The debacle in Afghanistan and the sad and pathetic speech by Joe Biden shows a leader that is out of touch with reality and his leadership and policies are becoming more of a factor in global oil prices. Iran for example is ignoring U.S. sanctions and pretty much exporting as much oil as they want to. Iranian oil exports are now estimated to be at a whopping 3 million barrels per day and rising. There are signs that the Biden administration is now expecting that a deal with Iran to get back to the nuclear talks is less likely. They are going to plan B and working with Israel to come up with a plan to thwart the rogue state from getting a nuclear weapon.

In the meantime, China is becoming more aggressive with Taiwan. China now is vowing to go in and rebuild Afghanistan after the incredible failure and chaotic U.S. withdrawal.

North Korea is restarting its closed nuclear power facility. The Wall Street Journal reported that North Korea appears to have restarted its Yongbyon reactor, which produces plutonium and was likely shut down in December 2018. Our enemies are emboldened and they're testing this president more every day.

Joe Biden said the chaotic withdrawal from Afghanistan was a success so therefore, it was a success. In Biden’s twisted world, there are no losers when it comes to his decisions. If things go wrong, there’s always someone else to blame. You can blame President Trump. You can blame the Afghanistan leadership. You can blame the Afghanistan army. You can blame our allies. You can blame American citizens that didn't take their warnings to exit the country. But at the end of the day, don't blame Joe Biden. Biden and his administration are too busy trying to congratulate themselves and take their victory lap for one of the darkest days in American history. There was a lot that bothered me about his speech. Biden seems to contradict himself so in many ways. He said that he promised to get out of Afghanistan but blamed president Trump for setting the timeline and getting out. He blamed President Trump for making a deal with the Taliban but yet Biden himself decided to give full control of the withdrawal to the Taliban. The AP reported the U.S. left Afghanistan’s Bagram Airfield after nearly 20 years by shutting off the electricity and slipping away in the night without notifying the base’s new Afghan commander, who discovered the Americans’ departure more than two hours after they left, Afghan military officials said. This is not how a proud, strong nation acts. A terrible shame and a terrible legacy for Biden.