The draw down in U.S. inventories was only part of the driver behind today’s rally. President Trump’s announcement that the U.S. was officially withdrawing from the Iran nuclear deal sent markets on a bull run. With distillate levels well below the three year averages and analysts stating the gasoline levels are also low (which does not seem to be consistent with numbers if comparing to three year averages), we can expect that fundamental data will continue to support the longer term uptrend. If you plan to hedge to protect budgets, keep a close eye on values as today’s events are more likely to set the floor and not the ceiling on prices
Election results for Parliament in Lebanon have yet to be confirmed, but early polls point to gains in power by Hezbollah (the Iranian-backed Shia group) and Sunni parties in spite of low voter turnout. The JCPOA (Iran Nuclear Deal) may struggle without U.S. support. The E3 (U.K., France, and Germany) will have to work with China and Russia to forge a path forward from here. Meanwhile, lawmakers in Iran are burning a copy of the agreement as well as the American flag in protest. North Korea released three American citizens that have been held captive there for months as a goodwill gesture ahead of the potentially historic meeting between President Trump and Kim Jong-un. The new U.S. Embassy set to open next week in Jerusalem is still receiving huge criticism from Turkey’s President Erdogan.
U.S. diplomats face tough task imposing new Iran oil curbs: By restoring sanctions against Iran, U.S. President Donald Trump has tasked a little-known State Department office with convincing companies and governments worldwide to cut imports of Iranian crude – even if that means paying more to buy oil from other suppliers. The Bureau of Energy Resources got the job done during the Iran sanctions that spanned 2012 to 2015, when President Barack Obama had the cooperation of European leaders in choking off Iran’s main revenue source to pressure it to curb its nuclear program. This time around, the office faces steeper challenges: Europe’s leaders now oppose Trump’s aggressive stance on Iran and are considering ways to block the sanctions; the U.S. Senate has yet to confirm a leader for the bureau; and the State Department already has its hands full managing sanctions on Venezuela, trade disputes with China, and looming talks with North Korea. Under Trump’s renewed sanctions, foreign firms will have 180 days to make reductions or face penalties that can include fines and restrictions on doing business in the United States. Washington can identify the buyers, sellers, traders, shippers, insurers and financial institutions involved in Iranian oil purchases because all foreign transactions in U.S. dollars are cleared by the Federal Reserve. The work is harder if trades are done in other currencies. The United States has banned Iranian oil imports to its own shores for decades, so Washington’s ability to squeeze the exports will rely on convincing foreign governments and companies to pressure the Islamic Republic back to the negotiating table for a “better deal” – as Trump has said he expects.