March 22, 2019 11:35 PM / By Tom Kool Editor, Oilprice.com
While it seemed like the bulls were in control of oil markets, prices
crashed on Friday as poor economic signals boosted bearish sentiment.
March 22, 2019
Oil prices posted fresh four-month highs this week on tighter supply conditions
before economic fears sent oil markets crashing. Venezuela and Iran continue to
report outages, while the surprise drawdown in U.S. inventories had seemed to
give oil bulls the upper hand. Signals from the Fed that it was going to hold
off on interest rate hikes this year should also have been bullish for oil, but
the economic fear that drove that move from the Fed has hit oil markets too.
Report gives Trump justification for auto tariffs.
A confidential report was prepared for President Trump that offered him the
justification to impose tariffs on imported cars and trucks on national
security grounds, should he choose to go that route. The report was prepared in
mid-February and not previously reported on until Politico broke the
story this week. Such a move would be a major escalation in the trade war,
although car tariffs would target U.S. allies in Europe, particularly Germany.
White House officials and many Congressional Republicans oppose the move. Trump
has not made a decision as of yet.
Iran beating sanctions. Iran has sent several oil
tankers to Asia using documents that indicated the oil was from Iraq, according
to Reuters, although
who forged the documents was unknown.
Vitol sees peak demand in 15 years. The world’s
largest oil trader, Vitol, sees oil demand peaking within 15 years. “We
anticipate that oil demand will continue to grow for the next 15 years, even
with a marked increase in the sales of electric vehicles,” Russell Hardy,
Vitol’s chief executive, said, according to the FT. “But that
demand growth will begin to be impacted thereafter.” Vitol is reportedly
looking at investments in cleaner fuels and other forms of renewable energy.
Fed eases off more rate increases. The Federal
Reserve signaled a more dovish turn this week, indicating that the central bank
may not raise rates at all this year, a dramatic turnaround from the
expectation of two rate hikes. The move is very positive for oil prices,
however the justification for backing off more rate hikes is that the central
bank sees the global economy slowing more than
Trump’s economic team sees upside to high oil prices.
“If the United States becomes an annual net exporter of petroleum, higher oil
prices would, on average, help the U.S. economy,” the Council of Economic
Advisers said in annual economic report, flagged by Bloomberg. “In this
case, the net gains for producers, and to their private partners that own
mineral deposits, would outweigh the higher costs for consumers.” The
conclusion flies in the face of Trump’s preference for low prices.
EVs kill 352,000 bpd of oil demand. Global EV
adoption continues to rise, but the cumulative total displacement of oil from
the transportation sector will only reach 352,000 bpd this year, less than 1 percent of the global oil market. Still, EV
sales continue to increase.
AMLO’s plan for Pemex could drag down both. Mexico’s
President Andres Manuel Lopez Obrador is trying to rescue state-owned Pemex,
which is suffering from declining oil production and the world’s largest pile
of debt. However, his plan, to cut taxes on the company, could put public
finances in jeopardy while doing little to turn the company or production
around. “Serious trouble at Pemex can be truly toxic for sentiment and the broader
economy, and would contaminate the sovereign balance sheet,’’ said Alberto
Ramos, the chief Latin America economist at Goldman Sachs Group Inc. in New
Ford to invest $900 million in EVs. Ford (NYSE:
F) announced plans to
spend $900 million to hire 900 workers to build electric and self-driving
vehicles in Michigan.
Court rules oil and gas leases didn’t account for climate impacts. In
a landmark ruling, a U.S. court ruled that leases granted by the federal government
for oil and gas drilling in Wyoming violated federal law because the government
did not assess the impact on climate change. Worse for the industry, the ruling
“amounts to a road map that could be used to challenge hundreds of Trump
administration leases as well,” according to the New York Times.
LNG prices collapse because of “onslaught” of supply. Prices
for LNG in Asia collapsed by more than 50 percent from their 2018 highs as a
wave of new projects have come online. “LNG supply growth of 22 mtpa in 2018
proved too much to handle. Now, we expect another 46 mtpa supply in 2019 and 27
mtpa in 2020, with most of the volumes coming from the US,” Bank of America
Merrill Lynch wrote in a report.
1. Nigeria Produced
55.85m Tonnes of Solid Minerals in 2018 - NBS
2. Oil Price Rally
Hits Resistance – OIR 190319
3. Oil Prices Surge
To Multi-Month Highs - OIR 150319
4. P and ID’s Risk
To Nigeria - Hedge Fund Purchase Underscores Fiscal, Monetary Risk
5. Average Prices
of PMS, AGO, HHK and Cooking Gas – February 2019
6. Oil Prices Inch
Higher On Venezuelan Crude Crisis – OIR 120319
7. Oil Prices Sink
On Negative Economic Data – OIR 090319
8. Bulls Battle
Bears As Oil Prices Stall – OIR 050319
9. NEITI: Nigeria Lost At Least $16bn To Non-Review Of
10. The End Of A Record-Breaking Oil Rally?