Oil prices are hanging in a tight trading range as the market tries to balance record U.S. petroleum inventories versus an outlook for a global tightening of supply as OPEC lays the groundwork for an extension of production cuts.

The U.S. supply glut, while at a record high, looks smaller if you put it into a global context. Global oil spread differentials will encourage more U.S. oil and product exports and the U.S. right now is one of the cheapest places to store oil. This comes against a backdrop of oil supply falling on a global scale. Global demand is on track to exceed 100 million barrels of oil a day in 2018 and there is a concern in the marketplace that we will be able to meet that demand. With trillions of dollars in capital spending by oil companies, last year canceled and projects that might ease supply constraints going forward. Despite talk by some that U.S. shale oil producers can ramp up to meet that demand, the truth is it is highly unlikely.

Demand weakness seems to be seasonal in nature and based upon global growth projections, demand numbers should snap back. More storage in the Gulf Coast should keep inventories high as well as more sales from the Strategic Petroleum Reserve.

I spoke to an SPR source about why SPR sales have not been reflected in the weekly data. The reason is that the buyer of the oil has 30 to 60 days to collect their oil. What is still unclear is whether the buyer must acknowledge that it owns that oil to the Energy Information Administration as a product so it is possible that those barrels are being counted twice. So this month the SPR has sold over 6 million barrels of oil and will sell 10 million barrels more by the end of the month.

President Donald Trump’s budget may have a significant impact on the Department of Energy (DOE) as well as the overseeing of the Strategic Petroleum Reserve (SPR). Word has it that in President Trump’s budget there will be significant changes and cuts in the governmental agencies that oversee energy. It has been reported by the Hill and others that the Department of Energy (DOE) would cut funding for nuclear physics and advanced scientific computing research to 2008 levels. They are planning to get rid of the Office of Electricity and the Office of Energy Efficiency and Renewable Energy and the Office of Fossil Energy, which focuses on technologies to reduce carbon dioxide emissions. The goal is to eliminate programs that cost money and seem to yield little value and will allow the private sector to work on alternatives.