Tightening Path

After the showdown in Venezuela and a drop in the U.S. rig count, more folks are starting to agree with the Energy Report’s scenario that the global oil market is on a path to being undersupplied in just a few months. Not only are people questioning the optimism about shale production coming from the Energy Information Administration, they are also considering that a trade deal between the U.S. and China could jolt global energy demand higher.  U.S. gas prices and diesel prices are set to rise as the lack of heavy oil starts to impact refineries and U.S. production may start to fall. Yet despite the very bullish fundamentals, you cannot underestimate the power of the tweet.

Oil prices that were higher sold off after President Trump tweeted that oil prices were too high. Of course, what are we going to do about it? If he thinks OPEC is going to help him out, forget about it and if the Venezuelan situation gets out of control the only way to change that would be to release oil from the Strategic Petroleum Reserve.

The Venezuelan people were heroic as they stood up to dictator Nicolás Maduro, after clashes over humanitarian aid that left at least 3 dead and at least 300 injured. The Venezuelan dictator decided to kill his own people instead of allowing in food and medicine, and then gleefully taunted the U.S. over the dead bodies of those unarmed civilians killed by this brutal regime. That shows you where his heart is. In the meantime, the Venezuelan people suffer under this criminal regime as they have taken away their rights to replace their leader, as Maduro stole the election and has jailed many in the opposition. Juan Guaidó, Venezuela's interim president, called on the United States and the rest of the international community to consider "all measures" to overthrow Maduro who has proven his illegitimacy from his actions. For the oil trade, the odds of continuing conflict in Venezuela is going to keep heavy oil off the market for an extended period. What is more, the military control of PDVSA is making it likely that the infrastructure for their oil will continue to crumble.

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