The Energy Report

Slowdown the Barrels

Slowdown the barrels. Lower production before prices falls again: prices start rocking, we expect the Russians will be onboard again now. For we need production limits, right this very minute, exports in the window, market share we’ll win it. Yes, we need some oil limits, right this very minute. We might get a Trump tweet flurry so oil bulls may start to scurry.

OPEC cuts and it is only a matter of time before the tweets start coming. Oil prices are waiting on confirmation but if reports are right, the cartel, along with its favorite non-OPEC member Russia, is close to agreeing to an additional 500,000 barrels per day (bpd) production cut for the first quarter of 2020. That means OPEC will be cutting 1.7 million bpd, or 1.7% of global demand.

This cut extra cut was not expected by the market and if confirmed will provide strong support for the oil market. The cuts are coming at a time of year when demand will be the strongest and may also add pressure to product prices, especially ultra-low sulfur diesel, ahead of the new IMO 2020 ship fuels. The production cut should be what OPEC needs to push oil prices over the top. This should lead to be crude draws around the globe where already forward demand cover is at the lowest level in years. While the markets response may be muted, make no mistake about it, this will give oil a floor.

This is true even as the Energy Information Administration reports that, “In September 2019, the United States exported 89,000 barrels per day (b/d) more petroleum (crude oil and petroleum products) than it imported, the first month this has happened since monthly records began in 1973. A decade ago, the United States was importing 10.0 million b/d more petroleum than it was exporting. Long-running changes in U.S. trade patterns for both crude oil and petroleum products have resulted in a steady decrease in overall U.S. net petroleum imports.

Net petroleum trade is calculated as total imports of crude oil and petroleum products less total exports of crude oil and petroleum products. Although the United States currently imports more crude oil than it exports, it exports more petroleum products than it imports, resulting in net total petroleum exports. Hedgers need to be hedged.

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In case you missed it! Phil’s guest appearance on the McKeany-Flavell Hot Commodity Podcast last Friday, September 20th talking about current energy market dynamics. LISTEN HERE!

Phil Flynn
The PRICE Futures Group
Senior Market Analyst & Author of The Energy Report
Contributor to FOX Business Network

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