From Exec Spec
Oil fundamentals continue to look strong since the big swing producers in US & Saudi Arabia can’t increase production much – in the US that’s due entirely to transportation bottlenecks that are 1 to 2 years from full solution.
And Libya, Venezuela & Iran and possibly Mexico among others continue to have strong downside risk 2nd half 2018 & 2019 on production that will keep current consumption levels difficult to supply
The huge caveat is Trade War escalation!
Odds continue to grow that there will be no immediate compromise near term & thus Trump is content to allow tariffs to grow until stock markets here & especially abroad fall more sharply & foreign currencies fall further which will upset their people in the weaker countries like Iran. (prices inflate with weaker currency)
So fundamentals are good, but Oil outlook psychology may start to shift very soon with the July 6th tariff kick off deadline where markets start to anticipate slower global economy ahead than originally forecast as long as there is no serious discussion of a major compromise. Trump clearly will not blink, even with another 10% stock market drop & Europe, China & others seem determined to keep the tariff retaliation game going in coming weeks, perhaps through late 20187 or until there is economic and stock market weakness that is loud enough to scare foreign leaders
While low 80’s is the upside potential this year, the Trade War escalation could trigger a reversal back into the 60’s.
Once a Trade Deal with China is secured, then Oil can move into the 90’s 6 months afterwards.
Brian Sly and Company, Inc.