Iran raised a few eyeballs after Iranian President Hassan Rouhani said that Iran has a new oil field that would increase Iran's proven reserves by an impressive 53 billion barrels of oil. Overnight, this would increase its proven reserves by about one third. The only problem is, with sanctions in place and the lack of capital investment, that oil might not see the light of day for decades to come. There is also some speculation that the timing of the announcement might be a way to tweak its rival Saudi Arabia just before they are trying to price its Saudi Aramco IPO.

Regardless, Dow Jones reported that an Energy Department official has confirmed that sanctions on iran have removed about 2.0 million barrels from the global marketplace. This comes a day after it was reported by Reuters that Iran is enriching uranium at its underground Fordow site. The reports say that Iran is rapidly accelerating enrichment more broadly according to a report by the U.N.'s International Atomic Energy Agency. Iran is making further breaches of its 2015 nuclear deal with major powers and reduces the odds that a deal with Iran to lift sanctions can be had and this is bullish for oil.

This comes as that same official suggested that the U.S. will hit a production level of 3.0 million barrels a day. Still, that same official seems to suggest that despite the increase in supply, he sees U.S. shale producers pulling back. He says that it is a healthy sign that shale producers are going after value and not volume.

IMO rules are causing wide swings in the market. Bloomberg reports that late last week, high-sulfur fuel oil for December was trading at a discount of almost $30 a barrel to Brent, according to data from ICE Futures Europe. In June, the same contract was at a $13 discount. The ship-fuel rules, known as IMO 2020 by traders, are expected to favor low-sulfur crudes, and both Urals and Arab Light have a relatively high content of the pollutant.

Oil prices are moving positively on trade developments. According to reports, it appears that the Trump Administration is going to delay EU auto tariffs as negotiations seem to be bearing fruit. Also, there is speculation that Trump will say some positive things about U.S./China trade talk progress. Still, behind the U.S. China trade talks is the fact that protests in China are becoming more violent. Some fear this could complicate trade progress.

We are still getting a lot of feedback about the Energy Information Administration article. I want to give Mr. Robert Merriam time to explain what he thinks is important from our back and forth from my readers. He says to the main points to help readers understand that EIA counts/reports barrels as imports (and CBP reports exports) as when they clear U.S. Customs. This process is done digitally/electronically, often in advance by a few days, of the vessel arrival to the U.S. port of destination, so it’s not tied to the ship’s physical location. Moreover, abbreviated tweets on the pro of the vessel arrival to U.S. port of destination, so it’s not tied to the ship’s physical location. Moreover, abbreviated tweets on the process made it seem that we’re simply waiting for some shipping clerk to file paperwork and mail it in. That does sound pretty lax but that’s not the case at all. These transactions are filed digitally by the importer/exporter and are uploaded into the CBP transactions database that is made available to EIA in near real-time. In addition, for imports, we conduct our own survey that captures their reports directly and compares that to what is filed with Customs to validate our import surveys. We’re simply measuring these import/export transactions at a different point in time from the ship trackers and it’s not based on when they land.

I think the crux of (some) reader skepticism is that they doubted the estimated weekly export drop and thus assumed that we backed into or errantly derived the stock build as a result, giving the market an errant signal. That’s a major misconception and likely the reason that those traders who better understand the new relationship and reasons underlying massive daily moves in/out of crude from inventory are not shocked by the large stock swings in some weeks, once they fully assess the factors that likely caused it, resulting in the muted price moves we often see despite some analysts’ fixation on one number in isolation without context….  stocks.