rounded corner
rounded corner
top border

Crunch Time. The Energy Report 02/12/19

Bookmark and Share

Oil prices are bouncing back on hopes that the U.S. might avoid a government shutdown and talk of progress on the U.S. China trade talks. White House adviser Kellyanne Conway told Fox News that “This president (Trump) wants a deal. He wants it to be fair to Americans and American workers and American interests.” Fox News also reports there is a deal to keep the government open, but with far less money for a wall then President Trump originally wanted. So, if we indeed get resolutions on these thorny issues, oil demand will outperform expectations and then oil prices go into crunch time. In other words, if we get a China deal coupled with OPEC cuts and Venezuelan sanctions, we are most likely going to see a supply crunch.   

 The recent crash in the price of oil assumed a lot of economic doom and gloom. If the gloom is not so gloomy, it is very possible that the oil market might be undersupplied.

It is not only me saying this. The CEO of BP, Bob Dudley, warned that oil market uncertainty could lead to a “real crunch”. In an interview with a CNBC reporter he warned that  “there’s a lot of variables here and there’s a lot of things that could lead to a real crunch.” Dudley said that ” when prices are too high or too low, it leads to all kinds of unintended consequences.”

For oil, we have had more than our share of unintended consequences. When President Donald Trump talked about sanctions on Iran, it caused prices to go too high too fast. When he tweeted about OPEC, he caused them to break too fast. When the OPEC and U.S. producers ramped up production to offset the lost Iranian barrels, it had consequences. When President Trump granted waivers to Iran’s biggest buyers, it had consequences.

The break in price forced drillers to cut back on rigs. It caused oil companies to cut back on investment and now OPEC is determined to remove any hint of excess supply.

Now with refiners scrambling to replace the heavy sour oil from Venezuela, we are seeing gas crack spreads start to improve showing the first signs that we may see tighter gasoline supplies once we get back to the summer driving season. Diesel prices are at big risk as well, especially if the refiners can’t find enough heavy crude.

Refining maintenance season is ahead but soon crunch time will set in. When it does, we will see a big rally in oil and products. U.S. demand is near record highs and U.S. consumers feeling more confident about their prospects than they have in a long time bodes well for demand.

Maduro is still acting like he is staying around in Venezuela. Reuters is reporting that “Foreign partners of Venezuela’s PDVSA are facing pressure from the state-run oil firm to publicly declare whether they will continue as minority stakeholders in Orinoco Belt projects following U.S. sanctions,” three people familiar with the matter said. The sanctions on Petroleos de Venezuela (PDVSA), imposed last month in an attempt to dislodge Venezuelan President Nicolas Maduro, barred access to U.S. financial networks and oil supplies for the PDVSA joint ventures, pressuring Venezuela’s already falling crude output and exports. PDVSA has been in talks with the companies to persuade them to commit publicly to the joint ventures, the sources said in recent days. France’s Total SA, Norway’s Equinor ASA, Russia’s Rosneft and U.S.-based Chevron hold minority stakes in joint ventures with PDVSA that produce crude and operate oil upgraders capable of converting Venezuela’s extra-heavy oil into exportable grades. PDVSA did not reply to a request for comment.

On Monday, Venezuelan Oil Minister and PDVSA head Manuel Quevedo on a visit to India said that relations with international oil companies including Chevron were continuing. A manager at Rosneft said last week that the company did not expect oil output to decline at its projects in Venezuela this year, adding that the company saw the current situation in Venezuela as temporary.  Rosneft did not respond to a request for comment on Tuesday.

Phil Flynn


It is time for you to prosper! You need to tune into the Fox Business Network where you get the power to prosper! Call to get my special reports and get info on my next speaking appearance and Masterclass. Call me at 888-264-5665 or email me at



Recent articles from this author

About the author

Mr. Flynn is one of the world's leading energy market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets.

Phil Flynn's accurate and timely forecasts have come to be in great demand by industry and media worldwide. His impressive career goes back almost three decades, gaining attention with his market calls as writer of “The Energy Report”.

He is a daily contributor to Fox Business Network where he provides daily market updates and analysis. Phil’s daily commentary is also featured in Futures Magazine, International Business Times, Inside Futures, 312 Energy, Enercast, among many others.

Phil is a lifelong resident of Illinois. He attended Daley College in Chicago before beginning his career on the trading floor of the Chicago Mercantile Exchange which eventually led him and his team to The PRICE Futures Group.

Media highlights include: The President of the United States, Bloomberg, ABC, CBS, NBC´s "Today Show" and "Nightly News with Tom Brokaw", CNBC, CNN/CNNfn, FOX´s "O´Reilly Factor", PBS´s "The Newshour with Jim Lehrer" and "Nightly Business Report", MSNBC´s "The News with Brian Williams", The Wall Street Journal, Business Week, Investor´s Business Daily, The New York Times, The Los Angeles Times, Chicago Tribune, Associated Press, The Toronto Globe & Mail, Houston Chronicle, Futures Magazine, Inside Futures, and National Public Radio.

Contact Phil Flynn: (800) 769-7021 or at

Published by Barchart
Home  •  Charts & Quotes  •  Commentary  •  Authors  •  Education  •  Broker Search  •  Trading Tools  •  Help  •  Contact  •  Advertise With Us  •  Commodities
Markets: Currencies  •   Energies  •   Financials  •   Grains  •   Indices  •   Meats  •   Metals  •   Softs

The information contained on is believed to be accurate but is not guaranteed. Market data is furnished on an exchange delayed basis by Data transmission or omissions shall not be made the basis for any claim, demand or cause for action. No information on the site, nor any opinion expressed, constitutes a solicitation of the purchase or sale of any futures or options contracts. is not a broker, nor does it have an affiliation with any broker.

Copyright ©2005-2019, a product. All rights reserved.

About Us  •   Sitemap  •   Terms of Use  •   Privacy Policy