Post-US president tweet - fluctuation in crude

Sudden changes may hit market by March 2019 (post Brexit). Some believe Euro will break in the coming year as the sentiments are already picking up in the markets. The trade war will result in unexpected trends, and China’s policies and debt may raise risks. Post-recession experts are continuously analyzing market trends to understand the formulae of recession, and there are assumptions that crude gains come prior to a recession. In 2008, the rise in price of crude beyond $4 led to inflation and speculation of recession. In 2018, the price of crude was 20 per cent more than average and now the speculators assume the spike in price can lead to another recession in the coming years.

In July, last week crude was up to $73.09 per barrel, as US oil companies cut many oil rigs, growth reduced and prices of crude declined.  Recently, many hedge fund managers suggested reducing long positions in crude oil by one-third, and many are rushing for an exit. Alternatively, short positions are favored in crude.

Positive trends in oil sector such as return of Libyan supplies and increased sale of Saudi oil to Asia led to fluctuations in price.  US congress is preparing to clear a bill to sue OPEC for fixing oil price, and a bill, which was called NOPEC was introduced in May 2018 with one of the provisions to promote trade between states and increase trade with the foreign investors.  US president has been criticizing OPEC and aims to introduce laws to block oil imports from Middle-East i.e. Saudi Arabia. Saudi Arabia has been forced to increase production of crude and is said to be under pressure from the US to pump more crude to prevent high crude rates during the midterm election in the US in November.  The minister in Saudi Arabia said that blocking trade was not a good option for countries, especially, when US has been identified as the promoter of free market.  

Trade war also led to low import of crude by China by at least 12 per cent and   a tweet by the US president to Iran’s President “to never threaten US or will face severe consequence,” led to rise in price in crude oil where the price reached $75.27 a barrel. The US president warned Iran that it will block the Strait and impose restrictions that will cut supply to zero from 2.5 million barrels each day. Saudi Arabia and UAE have pipelines in Middle East and the network goes to the Turkish port. Currently, 90 per cent of the Iran’s oil (Iran is second largest producer after Saudi Arabia) goes through the gulf and it is planning to ship crude through another new route from the terminal of island of Jask, Oman by 2020.

US plans supplementary ways to fulfill the local crude demand - through increasing production at home where the aim is to pull crude from Gulf and use cheap barrels from Shale in the North Dakota to meet demand. US plans to revoke California’s authority regulatory to promote electric car sales as the crude stockpiles are decreasing in the US. 

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