Oil prices are struggling to follow through on this week’s breakout as global fears about Covid-19 and lockdowns rise along with mixed economic data coming out of China. Even rising tensions between the U.S. and Iran over the U.S. seizing Iranian cargoes of gasoline headed towards Venezuela seemed to be offset with the historic agreement the U.S. brokered deal between the United Arab Emirates and Israel where they would establish “full normalization of relations”.

In China, refineries processed a record amount of crude oil in July at a reported 59.5 million tons. There are 7.33 barrels in a metric ton so you can do the math. While that is a bullish number, other Chinese data was disappointing. Chinese industrial production came in 4.8% below expectations of 5.2%. They also saw a miss on their retail sales figures.

The U.S. retail figures today should be big as it will be a sign how U.S. consumers are hanging are doing in this pandemic lockdown. Expectations are high for a 2% increase, which based on recent domestic demand numbers for U.S. gas and diesel, should be easily met.

The market is also weak on reports that the UK is imposing travel bans. France 24 reports that, “Britain on Thursday said it will reimpose quarantine for travelers from France and the Netherlands, prompting Paris to quickly announce a "reciprocal measure". The UK government declared the change, which will likely spark a mass exodus among the estimated half a million British holidaymakers currently in France, after a rise in coronavirus cases there.

Ethanol trade wars. DTN reports that, “With time running out on Brazil's current ethanol tariff on some U.S. ethanol imports and a pending threat to set a new tariff on all of those imports, the Renewable Fuels Association is asking the U.S. trade representative to impose tariffs on all Brazilian imports. President Donald Trump said during a news conference on Monday his administration is considering a reciprocal tariff against Brazil.

In response to a reporter's question Trump said, "As far as Brazil is concerned, if they do tariffs, we have to have an equalization of tariffs. You may be seeing something on that very soon." In a letter to U.S. Trade Representative Robert Lighthizer on Tuesday, RFA President and Chief Executive Officer Geoff Cooper said the Brazilian tariffs have been weighing on U.S. producers. "While we would strongly prefer a return to the free and fair two-way ethanol trade relationship that we enjoyed with Brazil between 2012 and late 2017, it has become clear that the Brazilian ethanol industry (and some of the nation's political leaders) no longer share our desire for free and open markets," Cooper wrote.

So while oil is stuck in slow motion, and we could correct if stocks falter, the supply versus demand trends still suggest a tightening of supply. Not only will oil supplies trend down, we should see products start to fall. Jet fuel is still the weakest part of the sector and the UK travel ban will not help.