The ceasefire agreement between Israel and Iran is already paying dividends for the global economy but it could create a major hit for Malaysia’s miraculous exports. In fact, one of the most mysterious stories in the global oil market was how Malaysia was able to export as much as 1.5 million barrels of oil a day when the country could barely produce over 500,000 barrels a day! Yet after President Trump said it will now be OK for China to buy Iranian crude, the prospect Malaysian crude oil exports just plummeted.
In the world of the global oil market, Malaysian crude oil exports serve the same purpose that Swiss banks were accused of. Malaysia is a kingpin, laundering sanction tainted oil, instead of money, from around the world and rebranding it through ship-to-ship transfers off the Malaysian coast. Of course Malaysia they can still launder Russian oil, I guess.
While President Trump’s proclamation that China can openly buy Iranian crude, that won’t add any new barrels to the market. It will cut out the business for the middlemen who profited greatly from these oil laundering shenanigans
This will result in increased revenue for Iran, while China will have to pay a higher price for Iranian oil due to the transparency of the trade. China will not be able to command as large as a discount as they did prior to sanctions.
In fact the ceasefire agreement that seemed to be threatened with reports that both Israel and Iran have broken the ceasefire agreement was put back in check when President Trump using the F word, a word that Liberal Democrats freely throw around, said that, “We basically have two countries that have been fighting so long and so hard that they don’t know what the F they are doing”.
And while the F word is probably not the preferred method of communication it did seem to get the point across to Israeli Prime Minster Benjamin Netanyahu that was on the phone almost immediately apologizing to President Trump. He said that it was too late to call back the last set of bombers, but he will adhere to the ceasefire in the future. Iran also got the message as this morning President Trump is steadfast in his position that Iran needs to adhere to the ceasefire and it seems that they are. Maybe they are running low on missiles.
President Trump, when asked if he would consider striking Iranian nuclear sites again should they rebuild their nuclear program, responded “Sure”. He was also questioned about intelligence reports indicating that US strikes did not completely disable Iran’s nuclear capabilities; he acknowledged uncertainty but firmly stated that Iran will not be allowed to develop a nuclear bomb.
Regarding Iran’s plans to enrich uranium, President Trump emphasized that the United States will not permit such actions, implying potential military intervention. And I would assume they still know where Ayatollah is.
This morning Iran’s foreign ministry spokesperson said that the Iranian nuclear installations were “badly” damaged.
The drop in oil prices is going to be welcomed especially as consumers in the United States get ready to take off for their 4th of July holiday plans.
At the same time, as I pointed out on both the Big Money Show on the Fox Business Network and Fox and Friends over the weekend that the odds of Iran’s ability to take out the Strait of Hormuz was severely limited by the Israeli military intervention as well as the historically accurate attacks by the United States and their brave pilots over the Iranian nuclear sites.
On top of that, China’s dependent on the Strait of Hormuz. Many of their goods enter the country not to mention their very precious imports of that Malaysian crude. That was another reason why Iran did not try that because they need China. Iran’s proxy groups have been beat back into submission.
The oil market may have to celebrate another peace dividend as President Trump believes that the talks in Gaza are going “pretty well.” It would be wonderful if President Trump could secure the release of all the hostages that are still being held by Hamas.
For oil prices, usually when we get this type of sharp pullback and prices it’s usually the third day when prices start to recover. Sure, we all like lower oil and gasoline prices but too much of a good thing can be bad for the US oil producers. Oil prices will need to stabilize here to keep the oil producers humming especially the shale producers that have been feeling stress in some places due to low oil prices.
At the same time President Trump’s policies that are reducing inflation and lowering regulatory costs should make it easier for independent oil producers to adjust. Yet plunging oil prices makes it hard for anybody to adjust.
We do need some stability here and some patience as we usher in a new fundamental outlook for oil. We have a massive reduction of the geopolitical risk cost. So in other words, President Trump’s peace through strength is actually putting money in your pocket today as it will reduce the cost to fill up your gas tank. It will also help build materials come down in price which will help home builders as well.
Now if we could only just get a cut in interest rates. Fed chairman Jerome Powell seems to be very stubborn as he sees inflation behind every tree. Fed Governor Michelle Bowman yesterday said that she thinks that if she doesn’t see any signs of inflation she would be ready to push for an interest rate cut as early as July.
A reported big drawdown in crude supplies in yesterday’s American Petroleum Institute() supply report could bring the stability into oil prices that many oil producers are hoping for. The American Petroleum Institute reported a significant drawdown of 4.277 million barrels of crude oil, following last week’s 10.13-million-barrel reduction at Cushing, Oklahoma. Diesel supplies decreased by 1.026 million barrels, while gasoline inventories rose by 764,000 barrels. Given the geopolitical turmoil, the diesel market has remained strong.
If the Energy Information Administration’s report shows similar figures, oil prices may stabilize or potentially recover. Swing trading has been effective in capitalizing on these market movements, not only in oil but across various commodity markets.
The will release its numbers today at 9:30 AM Central time.
Natural gas also got caught up in the exuberant sell-off in the oil market but is recovering and cooling demand is going to stay center stage in this market.
Fox Weather is reporting that a massive heat dome that sparked the first major heat wave of the summer brought record-breaking temperatures to cities from the Midwest to the Northeast this week, but some much-needed relief from the extreme weather is on the horizon. Officials across the eastern half of the U.S. urged people to prepare and take precautions to prevent heat-related illnesses as temperatures skyrocketed. Still, it wasn’t only the heat that proved to be dangerous. The heat could prove dangerous to bears.
EBW Analytics reports that, “record Northeast heat is driving regional electricity shortage pricing and strong regional spot price premiums, very weak spot prices at Henry Hub—falling to just $3.31/MMBtu Tuesday—are collapsing July contract prices. July contract settlement keeps volatility risks high. Lack of strong heat and recent bearish defeat suggests price recovery may occur after the 4th of July. Later this summer, triple-digit storage surpluses could limit upside. However, strong summer heat and soaring LNG might push prices towards $4.00/MMBtu in the next 30-45 days. It creates some interesting option trades and swing trades on the daily levels.