Despite new COVID cases and a Chinese trade war scare from White House Economic Advisor Peter Navarro, oil keeps rolling along. The strength in the oil market is based on massive global production cuts and demand that is being driven in part by low prices, not to mention trillions of dollars in the global economic stimulus, is creating the trajectory of this oil bull market. Oil did get a scare after White House trade adviser Peter Navarro told Martha MacCallum, "The Story”, on the Fox News Channel last night that President Trump had decided to terminate the US /China trade deal. The comments spooked the stock market and the China-centric copper market and, to a lesser extent, oil. Yet later, President Trump tweeted in regards to the trade deal that it "is fully intact. "Hopefully, they will continue to live up to the terms of the Agreement!”. Navarro later claimed that his comments were taken "wildly out of context" and that sent stocks and oil back on its upward track.

Oil was also paying attention to increased geopolitical risk as well. The AP reported that "Saudi Arabia said on Tuesday that it intercepted ballistic missiles and bomb-laden drones launched by Yemen's Houthi rebels in an attack that began the previous night. The rebels did not immediately acknowledge the attack. However, their Al-Masirah satellite news channel said their forces would make an announcement later in the day about "a broad operation in Saudi Arabia." The attack began late Monday, with a brief statement on the state-run Saudi Press Agency suggesting other drones may have slipped passed Saudi air defenses, without elaborating.” On Tuesday, the SPA news agency quoted the kingdom's military spokesman, Col. Turkic al-Malki, as saying that Saudi air defenses intercepted a ballistic missile fired "toward Riyadh." The report did not elaborate. Al-Malki said the Houthis launched two other ballistic missiles and eight bomb-carrying drones in the attack, all of which the kingdom destroyed. 

Bloomberg News is reporting that OPEC laggards are falling in line. "Iraq, a habitual laggard, will account for just under half of the total. Having implemented only 46% of its promise to reduce supply by 1.06 million barrels a day in May, it will now cut an additional 573,000 a day over the next three months. It's obligated to lower production by an extra 57,000 in July, and then 258,000 in August and September. Nigeria, the next-biggest transgressor within the OPEC cartel, has pledged to make up for its 180,000 barrel-a-day overproduction in May by cutting an extra 45,000 a day each month between June and September. Despite the stumbles, the overall implementation of the new curbs by OPEC+ was strong last month, at 87%. Reports also say that Nigeria and Algeria are pledging to reduce their overproduction shortly.

The rebalancing of global supply is on a fast track. A private oil forecaster is predicting another draw in the Cushing, Oklahoma delivery point, and refiner demand for oil is on the upswing. We have said for some time not to underestimate the combination of falling output and rising demand in part stimulated by massive global economic stimulus.

RBOB futures and ultra-low sulfur diesel also are showing signs of a bottom. Ultra-low sulfur diesel should get a lift from increasing jet travel and RBOB from the re-opening of global economies. Refiners may fall behind the curve a bit as demand growth is catching them flat-footed.

Natural gas is still trying to bottom against overwhelmingly bearish fundamentals. Yet it has a chance for a dead cat bounce but it had better bounce pretty soon.