The historic OPEC NON-OPEC production agreement became known as OPEC plus one. Russia became that plus one as they joined OPEC and conspired with them to reduce production and ultimately raise production and reduce supply. As OPEC meets today it is OPEC minus one. Iran seems to be the lone holdout from a production deal that’s on paper.
OPEC speculation and a strong dollar on trade war fears is providing highs and lows on the crude oil market. Oil was rallying on a big 5.9 million barrels draw in inventory, and a record-breaking week for U.S. refiners as they ran a seasonal record 17.7 million barrels a day crude oil last week according to Energy Information Administration data.
It looks like it is going to be a showdown at the OPEC coral as Iran leads the coalition of the not so willing to raise oil production along with Iraq and Venezuela. The coalition of the willing lead by Saudi Arabia and the so-called Plus 1, Non-OPEC Russia seems as committed as ever to raising oil output. Russian Energy Minister Alexander Novak Is pushing for a 1.5-million-barrel increase in output, which is partly a negotiating tactic and partly a concern that the market might become undersupplied in the third quarter.
The intensifying trade tensions between the United States and China simply added to market jitters, consequently weighing heavily on emerging markets. While the prospect of higher U.S. interest rates is likely to stimulate fears of capital outflows from emerging markets, global trade concerns present a major risk.
The anticipation of a drastic shift in OPEC’s mindset is quite puzzling to most when you consider that the previous theme heading into meetings was how much production output could possibly be cut from the market. This focus has suddenly been replaced with anxiety over how much supply could potentially be added back into the market.
Trade war fears are escalating after President Donald Trump hit back against the Chinese by asking his administration to identify $200 billion worth of Chinese goods for additional tariffs at a rate of 10%. This came after markets started to shake off concerns about the United States imposing a 25% tariff on up to $50 billion of Chinese products.
As Russia smoked Saudi Arabia in the World Cup, crude oil ministers from those two countries signaled that indeed OPEC and Non-OPEC countries will be raising oil output. Saudi Arabia’s oil minister said it is “inevitable” that OPEC and Russian production will rise by what he says is a "reasonable and moderate" amount. T
President Donald Trump is fed up with crude oil prices and tweeted that “oil prices are too high, OPEC is at it again. Not good!” The Fed raised interest rates and Fed Chair Jerome Powell weighed in on oil and its impact on inflation and what they may mean for the economy going forward. This comes as surging U.S. refinery demand for oil shadowed over a 100,000-barrel a day increase in U.S. oil production.