Bulls have ‘hammerlock’ on oil market, OPIS’ Tom Kloza isn’t ruling out $100 a barrel

Oil expert Tom Kloza’s bearish days are behind him. Kloza, who’s known for calling the 2015 crude collapse, isn’t ruling out triple digit a barrel oil this year.

“Anything that’s between $70 and $100 [a barrel] right now doesn’t represent hyperbole,” he said recently on CNBC’s “Futures Now.”

 The veteran oil market watcher added: “The bulls aren’t just in charge, they’ve got a hammerlock on this market.”

The Oil Price Information Service [OPIS] global head of energy analysis blamed fresh geopolitical tensions for his bullish forecast — citing a potential U.S. military response if Iran resumes its nuclear program, Venezuela’s oil production nose diving and “spectacular” global demand.

“It’s been very bland geopolitically for the last few quarters before this quarter,” noted Kloza, who shed his bearishness about six weeks ago.

Since the first quarter ended on March 31, WTI crude oil has surged almost 9 percent to $70.70 a barrel, based on Friday’s close. That level puts oil prices around 3 year-highs. ICE Brent oil, which settled at $77.02 a barrel, is seeing a similar pattern.

Kloza believes there’s little to prevent Brent oil from reaching beyond the range of $80 a barrel. He suspected crude will trail behind Brent prices due to lower prices in the actual shale oil fields.

Nonetheless, the scenario screams higher prices at the pump.

In a note to CNBC, he wrote that “we are seeing a quiet crisis that is leading to very expensive diesel and jet fuel prices. Refiners and producers are doing wonderfully — retailers of gasoline or restaurants and end-users BEWARE.”

He estimated there’s a 50-50 chance the nationwide average price for unleaded gasoline will exceed $3 a gallon this summer. That could put pressure on President Donald Trump.

“The President is not dumb, and he knows that when gasoline prices get above $3 a barrel a gallon, whoever is in charge in the Oval Office gets blamed,” Kloza said. “That will be an interesting thing to watch.”

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May 8, 2018 – Crude Oil Draw Set Improve Bullish Sentiment

Cushing

After the much-awaited news regarding U.S. sanctions on Iran today, the American Petroleum Institute (API) reported a draw of 1.85 million barrels to the U.S. crude oil inventories for the week ending May 4, compared to analyst expectations that this week would see a smaller draw in crude oil inventories of 719,000 barrels.

Last week, the American Petroleum Institute (API) reported a large build of 3.427 million barrels of crude oil.

The API also reported a draw in gasoline inventories for week ending May 4, to the tune of 2.055 million barrels—a bigger draw than the 450,000-barrel draw that analysts had expected.

 Oil prices fell early on Tuesday as the market waited for U.S. President Donald Trump to render his decision on the Iran nuclear deal at 2:00pm. At 07:21 a.m. EDT on Tuesday, WTI Crude was down 1.37 percent at $69.76 and Brent Crude was down 1.13 percent at $75.31. Both benchmarks were at that time about $2 over last week’s figures.

The wait is now over with President Trump announcing this afternoon that the United States will withdraw from the deal, largely in line with what most had expected.

“Over the past few months, we have engaged extensively with our allies and partners around the world, including France, Germany, and the United Kingdom. We have also consulted with our friends from across the Middle East. We are unified in our understanding of the threat and in our conviction that Iran must never acquire a nuclear weapon. After these consultations, it is clear to me that we cannot prevent an Iranian nuclear bomb under the decaying and rotten structure of the current agreement. The Iran deal is defective at its core. If we do nothing, we know exactly what will happen. In just a short period of time, the world’s leading state sponsor of terror will be on the cusp of acquiring the world’s most dangerous weapon. Therefore, I am announcing today that the United States will withdraw from the Iran Nuclear Deal.”

Post-announcement, at 3:17pm EDT, oil prices started to regain ground, but were still trading down on the day.

U.S. crude oil production for the week ending April 27—the most recent data available—increased to 10.619 million bpd, according to the EIA.

Distillate inventories saw a huge draw this week of 6.674 million barrels. Analysts had forecast a much smaller decline of 1.375 million barrels.

Inventories at the Cushing, Oklahoma, site was the only build this week, with the API reporting a 1.653-million barrel build.

The U.S. Energy Information Administration report on oil inventories is due to be released on Wednesday at 10:30a.m. EST.

By 4:38pm EST, the WTI benchmark was trading down 1.44 percent on the day to $69.71 while Brent was trading down 0.68 percent at $75.65.