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Examining the oil market, one might think supply and demand are perfectly balanced. That is despite a supply deficit. Geopolitical risks versus reduced risk discipline seem to maintain this balance. In other words, it seems for every bullish headline we get a bearish headline.

OPEC is reportedly advancing their meeting to address the supply deficit while risks of the Russian-Ukraine war escalating increase. The Trump Administration is considering what you might call super sanctions to crack down on Russia. If President Trump really gets serious about putting tariffs and embargoes on Russian oil and gas, we could see a significant price spike. It’s unclear what these sanctions will involve, but Trump has options such as targeting Russian banks or restricting shipments of Russian oil. This could significantly increase prices if the sanctions are enforced.

Conversely, Iran remains committed to negotiations with the Trump Administration, potentially stalling to strengthen defenses for their nuclear program. Israel is unlikely to tolerate Iran’s uranium enrichment and may act against Iran’s nuclear infrastructure unless a robust deal halts the enrichment. This all has led to a boring trading range in the oil market and keeping prices locked into a hurry to get nowhere range.

The Wall Street Journal reported that, “The Trump administration is set to grant Chevron CVX a narrow license to preserve its oil-producing assets in Venezuela after the company’s Biden-era waiver to pump oil there expires Tuesday, according to people familiar with the matter.

Chevron would be able to maintain key infrastructure in Venezuela but would be barred from importing oil from the South American country. The license would mitigate the risk of a seizure by Venezuela of Chevron’s assets and allow the company to quickly resume operations in the event of a thaw in relations between the countries.

The Journal said that Chevron had lobbied the Trump Administration for months to allow it to keep pumping oil in Venezuela. But the company failed to overcome pressure from Florida lawmakers who had threatened to withhold their support for Trump’s spending bill last week unless the administration forced Chevron to pull out. The congressional delegation is allied with Secretary of State Marco Rubio, who has long pushed for tough sanctions to isolate Caracas. They see Chevron as propping up the regime of Venezuelan strongman Nicolás Maduro through its tax-and-royalty payments into the country’s treasury.

The Alberta wildfires have returned, and there is discussion about potentially evacuating some towns as the wildfire threat escalates. This development is significant for oil traders because Alberta is a major producer of oil. The previous wildfires in Alberta contributed to an increase in the cost of a barrel of oil.

The following rig count in the United States is raising concern about a future drop in U.S. oil production at the same time though many of the producers are refracting current riggs.

Gasoline crack spreads have remained strong, while diesel cracks continue to be weak. This trend might be expected. As we move further down the curve, consider going long on October unleaded gasoline against October RBOB gasoline, which typically reverses from late May into June. We are also seeing some big swings in other markets not only in oil but markets like gold silver platinum. You can take advantage of them if you have my Phil Flynn Daily Trade Levels.

The other key thing we must look at of course is the weather not only for oil but for natural gas.One of the good ways to do that is by downloading the Fox Weather app where today they talked about a potential tropical storm. Fox Weather said that Eastern Pacific braces for tropical depression or Tropical Storm Alvin. The National Hurricane Center said that a tropical depression or Tropical Storm Alvin is expected to form on Wednesday as Invest 90-E continues to churn off Mexico’s coast.

Most of the time storms coming in from the Pacific side pose just a slight risk to oil and gas production but this particular storm depending on the path could potentially work its way towards the Gulf of Mexico and that could create some problems. The rest of the Atlantic as far as tropical storms though looks clear even though the bulk of hurricane season is ahead of us not behind us.

EBW Analytics forecasts an upside price movement for natural gas in July. Near-term natural gas is influenced by a large spring injection and bullish supply/demand fundamentals but lacks immediate bullish drivers. Early June may see weak cooling demand, LNG maintenance at Sabine Pass, record production, large weekly injections, and a growing storage surplus. If summer weather is mild, storage surplus nearing 200 Bcf could impact the NYMEX curve. Mid-summer may bring higher power burns and LNG demand, reducing storage surpluses and potentially triggering gains if the weather is hot.

That’s why you need to download the Fox weather app to keep up with the latest weather developments

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