Mid-Week Review

The US is about to send a lot more oil into an already oversupplied world market

In the last decade, the U.S. has more than doubled oil production to 12.3 million barrels a day, making it the world’s largest producer. But the infrastructure needed to transport that crude out of Texas oil fields and onto the world market has been lacking. This month marks a big change for the industry with the start of the Plains All American Pipeline’s Cactus II, a 670,000 barrel a day pipeline, connecting the Permian Basin to Corpus Christi, Texas, and from there to the world. That pipeline, and another, named Epic, are just the start, with more to follow. The new pipelines are expected to take more Texas crude to the Gulf Coast, and from there it can be shipped out to the world, but the world is now well supplied, and even more U.S. oil could help depress prices, especially if the trade wars continue to suppress demand.  Click here to read more from CNBC.

Tariffs To Decimate China’s US Crude Oil Imports

China is likely to stop the import of US crude, as 5% tariffs on such crude will be put into place starting from September 1, 2019 and the country has no difficulties meeting its current oil demand. China announced last Friday additional tariffs of 5%-10% on 75 billion dollar worth of American goods, effective from September 1 and December 15, following the US announcement of more tariffs on Chinese goods. American crude is among the first batch of goods to bear the additional tariffs. The 5% tariffs will probably turn Chinese refiners away from US crude when the tariffs on crude from other countries are zero.  Click here to read more from OilPrice.com.

How The Trade War Impacts The Oil Industry

At the beginning of August, the markets were sent into a tailspin by President Trump’s threat to impose tariffs on another $300 billion of Chinese imports. The markets were broadly impacted, but the energy sector was hit especially hard. Crude oil prices suffered their largest drop in over four years.  President Trump subsequently backed off, citing concerns about retail spending headed into the holiday season. As if to further emphasize the risk, the yield on the 10-year U.S. Treasury bond recently fell below the yield on the 2-year U.S. Treasury. Most economists think the economy is still pretty healthy, but trade wars cost consumers money. When consumers have less money to spend, they buy fewer goods. The overall economy slows down. That could push the U.S. and the entire world for that matter into recession.  Click here to read more from Forbes.

Kenya joins ranks of oil-exporting countries

Kenya sent off its inaugural shipment of crude oil on Monday, becoming the first East African nation to join the ranks of petroleum-exporting countries. Though Kenya is still years away from building the infrastructure necessary to unlock its full commercial oil-producing potential, Monday’s maiden shipment of more than 200,000 barrels revealed possible tensions over how the nation’s crude wealth should be divided.  Click here to read more from Aljazeera.