Schachter Eye on Energy: Crude retreats as Iran may gain some sanction relief from President Trump

Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 34 energy and energy service companies with regular updates. He holds quarterly subscriber webinars and provides Action BUY and SELL Alerts for paid subscribers. Learn more and subscribe. 

There was a plethora of energy data out last week which included the EIA weekly data, the OPEC monthly report and the firing of National Security Adviser John Bolton, who is a hawk against Iran. Two of the three key pieces were bearish for energy prices and WTI crude oil backed off last week to US$54.90/b on Friday. 

OPEC MONTHLY REPORT: The OPEC monthly report released last Wednesday showed August 2019 production rising 136Kb/day to 29.74Mb/day. Increases were seen from Saudi Arabia 118Kb/day, Nigeria 86Kb/day and Iraq 43Kb/day. This was offset by Venezuela losing 43Kb/day to a new low of 712Kb/day. The fact that OPEC’s production rose despite Saudi Arabia changing their Energy Minister is not a positive for crude oil near term. The removal of John Bolton is also a bearish result as he has been a strong proponent of Iran sanctions and is in favor of deposing the Iranian government. President Trump now has increased options for dealing with Iran. US Secretary of State, Pompeo is in favor of negotiating with Iran and, if there is progress, reducing the trade and crude oil restriction sanction levels. President Trump may now agree to meet with Iranian leaders. 

EIA REPORT: The EIA report last week showed a decrease of 6.9Mb, greater than the expected 2.9Mb decline. Overall inventories fell only 3.1Mb as distillate fuel stocks rose 2.7Mb. The reason for the larger draw-down was that net imports fell 414Kb/day or 2.9Mb on the week. Now that the summer driving season is over, demand is softening and total product supplied last week in the US was 21.4Mb down 181Kb/day from the prior week. In the coming weeks we expect this number to decline below 20Mb. 

CONFERENCE UPDATE: We have finalized the Indigenous Leaders Panel for our conference and are pleased to announce that the panel will include Chief Dan George from the Burns Lake Band (Ts’il Kaz Koh First Nation), Chief Craig Makinaw from the Ermineskin Cree Nation and Dale Swampy who is a member of the Samson Cree Nation and the National Coalition of Chiefs. General admission tickets are now sold out. The VIP tickets which give you access to the CEO lunch and the Indigenous Panel are still available but going quickly.

On Monday September 16th at 9:30am ET the Schachter Energy Team will be opening the TSX in Toronto. Thank you to the TMX for being one of the sponsors of the Schachter Energy Conference. 
CONCLUSION: Oil prices should head lower in the coming weeks as the seasonal inventory build occurs and due to the surprise OPEC production increases. Price levels to watch on the downside are US$55/b and then a breach of US$50/b. We expect the $50 to be breached later this month or early October.

 

 

The 2nd Annual Schachter Catch the Energy Conference will be held at Mount Royal University in Calgary on Saturday, October 19th. This is a rare opportunity for investors to learn more and interact with 26 Energy Sector CEOs. Below are the 26 companies presenting at the conference.

Register early as a VIP to have lunch with your preferred CEO or company. Learn more and register.

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