pound sand

market vibes

Sunday, August 3… )

“It's just a job. Grass grows, birds fly, waves pound the sand. I beat people up.” Muhammad Ali

Crude oil was curiously weak on Friday, ostensibly due to a weak NFP report foreshadowing a US recession. However, on Saturday, multiple sources reported India would keep buying Russian oil, which seems to me a far more likely reason.

According to recent data, including the US DOE, Russia exports 4.8 million barrels per day (mm bpd), of which 2 mm go to China (much of it by pipeline) and 1.5 mm bpd goes to India. The rest goes to Turkey, Brazil, and other smaller buyers. Effectively, Russia exports oil to the BRICs, better said… to its allies.

As for China, the US concluded a preliminary trade deal in May, but much of it is still open to further negotiation. China imports 11 bpd crude oil, of which 3.5 mm bpd comes from Russia and Iran. Sanctioning 32% of China’s oil imports and 36% of India’s imports at a rate of up to a 100% penalty to the buyer might have sounded good in Scotland closing a trade deal with Ursula von der Leyden but Trump’s trade deals may come a cropper if Modi tells Trump to “pound sand.” France and Germany were not happy. China’s deal is half done.

Furthermore, earlier today, OPEC plus agreed to increase production by 547,000 bpd. According to the NY Times this morning, “The move, in effect, reverses a program of 2.2 million barrels a day in output cuts that was put in place in 2023 to tighten supply and prop up the markets.”

By my thumb roughly 70,000,000 new barrels of oil have been added to global supply by OPEC since April and 66 million new barrels per month will be coming to the market henceforth. In addition, Chevron will be adding 7.5 million barrels per month from Venezuela as the recision of Trumps sanctions announced on July 30 kick in over coming weeks.

And there is Canada… Carney’s push to become an “energy superpower” includes support for TMX (the Trans-mountain expansion) maximizing exports up to 890,000 bpd and faster project approvals via new pro-oil legislation. The August 1 rig count in Canada showed an increase of+10 to 182.

It appears this latest gambit to suppress Russian oil exports may fail (again) and as US producers are cutting rigs and production contrary to Trump’s wishes, the rest of the oil world is increasing it. Will India and China knuckle under? At any rate, the market had second thoughts on Friday.

Here’s an informative article from the India Times (link).

Good luck tonight! See ya on the opening tomorrow.

JJ

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