The oil market is finally getting it that supplies are falling as geopolitical risks are rising and OPEC is going to clamp down on members that are over producing quotas. In the meantime, the US oil rig count increased by just 2 rigs this week as shale producers are making some cutbacks. Our “Summer Solstice” turnaround on oil that we covered in our webinar is coming together almost on cue as the outlook for higher oil prices in the second half of the year is back on track.

OPEC needs to get some credit. Since the market dismissed OPEC's extension of cuts and tanked prices near $42.00 a barrel, they hurt many shale producers causing warnings from Hailburton that the sector is going to pull back. After a slew of capital cut announcements by producers, now comes word from OPEC that they will hold a meeting with some non-OPEC members Aug. 7-8 in Abu-Dhabi to assess how the group can increase compliance with production cuts. OPEC wants to crackdown on the cheaters and continue to drain global supply that has already fallen at breakneck speed since the end of March. U.S. crude inventories have fallen by 10 percent from their March to 483.4 million barrels. Low prices have also encouraged strong demand as gas demand in the US has surged, dismissing arguments that it has recently topped out while demand from India, China and Europe is surging.  The Saudis also gave support to oil when they said that would reduce exports to 6.6 million barrels a day.  That led to others like the UAE and Kuwait to pledge to reduce exports.

The US may impose more sanctions on the Venezuelan oil infantry after strongman Nicolas Maduro slaughtered his own people and continues to pillage what is left of the Venezuelan economy. Over the weekend the U.S. called the election of Nicolas Maduro a sham and a statement was issued that, "The United States stands by the people of Venezuela, and their constitutional representatives, in their quest to restore their country to a full and prosperous democracy. We will continue to take strong and swift actions against the architects of authoritarianism in Venezuela, including those who participate in the National Constituent Assembly because of today’s flawed election.” At this point, there are no sanctions on Venezuelan oil but on the industry itself. That will make it harder for Venezuela to keep production rising and ultimately will mean a higher cost for US drivers who will feel the impact of reduced shipments of heavy crude into the United States. 

Russia retaliated against US sanctions leading to more concerns about where we go next. North Korea also set off more missiles that theoretically could hit the Untitled States. The Trump administrations lashed out at China claiming that they need to do more to reign in North Korea.

Dow Jones reported that in Europe, a production outage at Shell's 404,000 barrel-per-day Pernis refinery in the Netherlands following a fire sent benchmark European diesel margins, which reflect the profit made from refining crude oil into the road fuel, to their highest since November 2015 at $14.60 per barrel.

We are looking for more drawdown in oil supply this week as the great rebalancing is underway. It will be just a matter of time and we will see many start to raise their oil price forecast soon after they just lowered them. Weather needs to be watched as well as Tropical Storm Emily formed in the Eastern Gulf Of Mexico .