-Mixed bag in the latest EIA report
-Don’t expect more Iranian oil anytime soon
Crude oil prices edged lower in the Wednesday session, erasing early gains just as hearings began for the second impeachment of U.S. President Donald Trump. Black gold fell out of favor after a mixed report from the EIA showed demand restraints were still prevalent. Meanwhile, the U.S. Federal Reserve said it had lingering concerns about the pace of economic recovery.
Crude oil prices started the trading day on a positive note, though gains started evaporating my mid-morning when the U.S. House of Representatives began impeachment hearings. The price for Brent crude oil was down 0.76% as of 2:40 p.m. ET to trade at $56.15 per barrel.
“He is a clear and present danger to the nation we all love,” said House Speaker Nancy Pelosi on Wednesday. Trump faces the distinction of becoming the first president in U.S. history to be impeached twice by the House. This time, it’s for inciting unrest against the very government he presides over. Unlike his last impeachment, a handful of Republican leaders have said the president committed impeachable offenses for encouraging his supporters to mount what would be described in any other advanced democracy as sedition. Rep. Tom McClintock, a California Republican, said impeaching Trump a few short days before he leaves office is “petty,” though members of his own party are the last ones that should be throwing stones.
That should at the very least usher in a sentiment of discontent for an administration that’s still working to undermine its predecessor. The Trump administration on Wednesday blacklisted two Iranian foundations controlled by Supreme Leader Ayatollah Ali Khamenei, part of an all-out economic assault on the Islamic republic. The more roadblocks Trump puts up before he leaves office, the more difficult the road to nuclear détente will be for Biden. Iran, meanwhile, holds presidential elections in June, making it even more difficult for rapprochement with Hassan Rouhani. That makes it unlikely that, as many had feared, Iranian barrels would enter the global trade stream and undermine a delicate balancing act for the oil market.
That balance is still out of whack. The EIA on Wednesday reported U.S. domestic crude oil inventories declined by more than expected, though petroleum product levels increased. Total products supplied, a proxy for demand, are still below levels at this time last year, but the gap is shrinking somewhat. Total products supplied during the week ending Jan. 8 actually improved slightly from the previous period, though some of that may be a latent effect from the holiday season.
Elsewhere, the U.S. Federal Reserve painted a mixed picture for economic growth, noting that manufacturing and other major segments were improving. It was largely a “yeah, but” Beige Book from the Fed. The Federal Reserve Bank of Atlanta noted that refinery output remained low. Vaccine news helped supported crude oil prices, though some contacts in its district were concerned about an oversupplied market. The Kansas Fed, for its part, said firms in its district still needed higher oil prices to see a major uptick in drilling activity. But the Dallas Fed said just the opposite; contacts in both the exploration and production side of the industry reported an uptick in business activity for the first time since the pandemic began in early 2020, perhaps justifying concerns from the Atlanta Fed on an oversupply situation. Broadly speaking, the sentiment was tepid at best.
“Although the prospect of COVID-19 vaccines has bolstered business optimism for 2021 growth, this has been tempered by concern over the recent virus resurgence and the implications for near-term business conditions,” the U.S. Federal Reserve noted.
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