The move by President Trump to raise tariffs on China was so inspiring that it caused Goldman Sachs to rescind their recession calls.
Trump set off a stock market buying short covering fire storm after he reported on Truth Social:
“Based on the lack of respect that China has shown to the World’s Markets, I am hereby raising the Tariff charged to China by the United States of America to 125%, effective immediately. At some point, hopefully soon, China will realize that the days of ripping off the U.S.A. and other Countries is no longer sustainable or acceptable. Conversely, and based on the fact that more than 75 Countries have called Representatives of the United States, including the Departments of Commerce, Treasury, and the USTR, to negotiate a solution to the subjects being discussed relative to Trade, Trade Barriers, Tariffs, Currency Manipulation, and Non-Monetary Tariffs, and that these Countries have not, at my strong suggestion, retaliated in any way, shape, or form against the United States, I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter! What a nice, classy way to end that note. The world is paying attention."
Is the world going to start paying attention to oil inventories? Even though we love that oil prices came down, reducing gasoline prices and inflation, we still must be concerned that the amount of the drop could cause some U.S. shale oil production. The son of shale pioneer, Scott Sheffield, the founder and former chief executive officer (CEO) of Pioneer Natural Resources (NYSE:PXD), Bryan Sheffield, warned that America’s shale drillers need to cut drilling immediately. He said it’s a bloodbath and that shale producers need to hunker down until this tariff war situation plays out. Mr. Sheffield is understandably concerned about the recurring price drops, noting that producers often maintain production levels despite fluctuations in market prices. Several other producers I consulted expressed similar worries, pointing out that producers sometimes fail to adjust their output quickly enough in response to price changes, resulting in overproduction.
Other producers believe that some shale producers will be more cautious. Andy Stauffer of “Ozark Gas LLC” mentioned that volatility has occurred before, and he thinks producers will take a careful approach before cutting drilling. Others suggest that cutting should begin sooner and that shale oil producers may be overly optimistic about prospects. Despite the volatility, supply and demand indicate that supplies in the United States remain tight, as confirmed by yesterday’s Energy Information Administration weekly report. The Short-Term Energy Outlook was not released yesterday because the numbers are being updated to reflect recent market developments.
Yet the volatility beyond all the tariff reports was very friendly for petroleum. EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.6 million barrels from the previous week. At 442.3 million barrels, U.S. crude oil inventories are about 5% below the five-year average for this time of year. Total motor gasoline inventories decreased by 1.6 million barrels from last week and are the same as the five-year average for this time of year. Finished gasoline inventories increased and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.5 million barrels last week and are about 9% below the five-year average for this time of year.
Total products supplied over the last four-week period averaged 19.6 million barrels a day, down by 1.9% from the same period last year. Over the past four weeks, motor gasoline product supplied averaged 8.6 million barrels a day, down by 2.8% from the same period last year. Distillate fuel product supplied averaged 3.8 million barrels a day over the past four weeks, up by 7.3% from the same period last year. Jet fuel product supplied was up 5.2% compared with the same four-week period last year.
Natural gas is also bouncing back on the risk on situation with more countries committing to buy US natural gas. This is going to be a huge win for producers. Natural gas report today!