The Daily Dose; OPEC, and America, Turns Against Itself.

-OPEC+ infighting threatens constraint

-The tides are turning against the US president

Crude oil prices were moving lower early in the Thursday session amid divisions among parties to the OPEC+ curtailment agreements. Media reports suggest Russia, which holds a seat on the committee monitoring compliance, and Saudi Arabia are on the same page in terms of an extension, but are at odds over how to deal with cheaters. Questions continue, meanwhile, over whether and when ministers will actually meet to discuss production trends. Elsewhere, an unexpected build in US fuel inventories raised doubts over whether American life is returning to normal. Volatility in US society, meanwhile, could spill over to investor confidence as the tide slowly turns against President Trump.

The price for Brent crude oil was down some 0.6% as of 8 a.m. ET to trade at $39.59 per barrel, bumping up again against the $40 per barrel ceiling. Prices were lower early Thursday after US data showed a 2.8 million increase in gasoline inventories, which remain about 10% above the five-year average for this time of year. Uncertainty is returning and threatening to undermine the early bounce of optimism.

Saudi Arabia and Russia are said to have agreed to extend cuts of 9.7 million barrels per day through July amid signs the market was over its storage-level crash in April. The Kremlin has been noticeably mum on formalities of the deal and parties are said to be at odds over how to deal with cheaters. Reporting from The Wall Street Journal indicates wrestling over how to handle countries such as Iraq and Nigeria, among those with less stellar records of compliance, could make the early handshakes moot. An obligatory source close to OPEC thinking told Reuters, for its part, that an extension “is conditional on countries who have not fully complied in May deepening their cuts in upcoming months to offset their overproduction.”

Cuts, however, are already from great heights, though Russian Energy Minister Alexander Novak said he expects markets may face a shortfall of as much as 5 million bpd by July. That would add to the bullish trends so far for crude oil prices, which have closed in negative territory only seven times since May 4. If the trend continues, it could ruin OPEC’s efforts to throttle US shale oil production. Some shale producers spent much of the first quarter lobbying for state-mandated cuts in production in order to survive a market bloodbath that pushed US crude oil prices into negative territory in early April. Now, many of those same producers, namely Parsely Energy, are returning to work. Total US production last week was depressed, though if oil prices manage to establish a floor at $40 per barrel, that trend could quickly reverse. Offshore and analysis from Wood Mackenzie finds operators in the US Gulf of Mexico are “leaner and nimbler” than before and largely “resilient at low oil prices.”

Meanwhile, the US implosion continues. Faced with a botched response to the coronavirus pandemic, negative GDP readings and the largest outbreak of social unrest since the civil rights and Vietnam movements of the 1960s, the tide is turning against US President Donald Trump. While polls are the crack-cocaine of the media industry, opinions do show the general disapproval of the president is mounting.

Some of the president’s staunchest political allies, such as Sen. Lindsay Graham, R-S.C., are urging Trump to avoid impulse and keep his defense secretary on the job. US Defense Secretary Mark Esper broke with the president over the use of force against protestors, a move that would usually result in his firing. Graham was quoted as saying the defense secretary was doing a good job and there was “no reason to let him go.” John Allen, a retired four-star general in the US Marine Corps who now serves as the president of the Brookings Institution, wrote in Foreign Policy that Trump continues to broadcast a message of “abject and arbitrary power, but he failed to project any of the higher emotions or leadership” as the nation unravels. In a first, the International Crisis Group called on US leaders to “stop courting conflict” and James Mattis, Trump’s former defense secretary, described the president as a threat to the Constitution in a damning commentary published in The Atlantic.  

“Donald Trump is the first president in my lifetime who does not try to unite the American people — does not even pretend to try,” he stated.

That could darken the mood as analysts anticipate a correction. “Be warned,” a headline on SeekingAlpha read, “Market momentum if fading.”

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