Market Report & Analysis for 7/24/2018 Morning Edition

Morning Market Overview

Despite a ratcheting up of the geopolitical risk and rhetoric coming from Iran’s Supreme Leader oil prices declined for the third week in a row last week. Iran’s leader backs suggestions that Iran should block all exports of crude oil from the Persian Gulf if US sanctions are placed on Iran.

That threat has come and gone many times over the years and the US and its allies will certainly do an effective job of keeping the Straits of Hormuz open. However, a threat is a threat and time will tell how it materializes and impacts oil flow… if at all.

For the last three weeks, the battle in the oil pits has been waged between those of the view that the increase in supply coming from OPEC will not be enough to offset the current and potential loss of oil production because of the evolving geopolitical events around the world… especially in the Middle East. So far, the bearish side or those expecting increased production will keep the world comfortably supplied with oil are winning. This discussion and battle will continue to be waged in the oil trading markets for at least the short to even medium term.

Currently, the market sentiment has shifted with oil prices biased to the downside for the short term. Friday afternoon the latest Baker Hughes data hit the media airwaves reporting the number of rigs deployed to the US oil sector declined by 5 rigs on the week after coming in unchanged during the previous week.

Total rigs deployed to the oil sector are lower by 94 or 12.3 percent year over year. Total US crude oil production is about 17.9 percent above where it was for the same week a year ago. This week’s production came in at 11 million bpd.