While the markets await the outcome from the Fed meeting and oil traders fret about whether OPEC and non-OPEC might raise production, as well as the weekly supply report, the biggest threat to the price of crude oil and the global economy may be the lack of spare oil production capacity. Reuters reports that global spare oil production capacity could fall from more than 3% of global demand now to about 2%, its lowest since at least 1984, if OPEC, Russia and other producers decide to increase output when they meet on June 22-23. Some analysts say spare capacity could even fall below 2%, after years of low oil prices drove down investments in new production across the industry to a historic low.
The S&P gave us exactly what we talked about yesterday, a constructive session with buying interest. The Russell 2000 has quietly been a leader for much of the post-correction trade and yesterday it set a new all-time high.
Crude oil prices dipped as trade war fears went away after a private report that appears to indicate that oil supplies may see a big increase this week. Genscape, the widely followed energy market data and intelligence company, reported that oil supply in Cushing, Okla., was up 2.18 million barrels last week. The increase and the fact that some of the Geo-Political concerns did not actually blow up into a supply disruption over the weekend led to a correction in the price of crude.
Trade War? What trade war? The fears that President Donald Trump’s threats of tariffs would plunge the globe into a devastating trade war is easing quite a bit. The Wall Street Journal reported that “'China and the U.S. have quietly started negotiating to improve U.S. access to Chinese markets, after a week filled with harsh words from both sides over Washington’s threat to use tariffs to address trade imbalances,' people with knowledge of the matter said."
You can talk all you want about rising U.S. oil production, but the fact is that U.S. crude oil supply is below average. The Energy Information Agency, in its weekly report, said that U.S. commercial crude oil inventories fell by 2.6 million barrels to 428.3 million barrels, which the EIA says are the lower half of the average range for this time of year. This is happening even as U.S. oil production reportedly increased to 10.047 million barrels of oil a day.
Quant Cycles (formerly called the Cycle Projection Oscillator) is a technical tool that uses proprietary statistical techniques and complex algorithms to filter multiple cycles from historical data, combines them to obtain cyclical information from price data and then gives a graphical representation of their productive behavior. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.