The Energy report 10/31/18
Iranian Oil Thriller
It’s close to midnight and something’s selling oil in the dark. Under the moonlight, you see a drop that almost Stops Your Heart. You Try to Scream, but the computer takes the trade before you change It. You Start to scream, as oil sells hard right before your eyes. You’re Paralyzed! Cause this is a thriller. Iran Sanction fight. And Saudi oil is not gonna save you. Oil is going to spike because it’s a Thriller night. Bears will be fighting for their life. Inside a kill thriller sanctions fight. They’re Out to Get them. Oil supplies will dry up on every side. They will possess you unless you Change Your bearish trading style. Now Is the Time for you and me to start to buy my dear. All Thru the Night, It’ll Save You from the Terror on the Screen, I’ll Make You See.
October was downright scary. We had ghosts of stock market crashes past as well as some amazing moves. Oil in some sense bought into fear of an economic slowdown because the stock market gyrated like Linda Blair’s head in the movie the Exorcist. Yet, despite those fears and terrors of a slowdown the oil demand remains incredible, ahead of oil sanctions on Iran that are going to tighten supply even further. While the oil market is acting like the impact from the sanctions is priced, get ready for the bulls to rise from the grave and scare the sanctions out of the bears. The spooky October selloff in oil may be over after price bounced off the 200-day moving average and the American Petroleum Institute reported a scary drop in both gasoline and distillate supply. Refiners are not building supply as the market is sucking down supply like a blood sucking vampire. The API reported that distillate supply dropped further below average, falling by a 3.1 million barrels. Even gasoline supply fell by 3.5 million barrels! Shriek! Thank goodness that crude supply increased by 5.69 million barrels, because based on demand we are going to need every barrel of that and then some.
Even as we get a report that U.S. sanctions are starting to hurt the Chinese Manufacturing industry. China’s official manufacturing Purchasing Managers’ Index (PMI) for October came in at 50.2, just barely an expansion the lowest reading since July of 2016 when oil started to falter as the Chines economy stumbled. Yet, the difference this time is that U.S. manufacturing is on the upswing. On Oct 15, the New York Fed reported that the Empire State manufacturing index rose 2.1% to 21.1 in October surpassing September’s reading of 19. Notably, any reading above zero indicates improvement in manufacturing sector. The ISM, going into the month, was at 59.8. So as China loses in Manufacturing the U.S. Is gaining.
The scariest part of Halloween this year is that it is ending. October and November is when the scary part begins. Refiners are coming out of maintenance and will be running at a record pace. Global oil supplies at the same time are going to be squeezed despite promises of more oil from Saudi Arabia. Iran sanctions will cut anywhere from 700,00 to 1.5 million barrels of supply and the Saudi might add about 300,000 barrels.
Global spare production capacity is at a record low while global oil demand is at record highs. Oil in storage, both on shore and offshore, has fallen drastically. Reuters reports that Imports of Iranian crude by major buyers in Asia hit a 32-month low in September, as China, South Korea and Japan sharply cut their purchases ahead of the sanctions on Tehran, government and ship-tracking data showed. Iran is the third-largest oil producer representing OPEC and the production level in Iran slipped to below 3.8 million barrels per day (bpd) for the first time this year in September.
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The PRICE Futures Group
Senior Market Analyst & Author of The Energy Report
Contributor to FOX Business Network