Crude crackdown

Iran’s Revolutionary Guard says it put a stop to the protests in Iran, yet the oil traders are not that convinced. After many arrests and more than 20 dead, the Iranian people are tired of being left out of the global economic surge. At the same time, the global economic surge is draining U.S. and global oil reserves at a record pace.

The API reported another 4.992 million barrels drop in crude supply as strong demand continues to draw down supply. Part of that demand is coming from the U.S. manufacturing sector, that according to the ISM posted its best growth since 2004, a great indicator of current and potential energy demand.

We did see a big 4.272-million-barrel increase in distillate supply but thank goodness because we need more supply to meet this cold demand and even with the increase, supplies are below average. The increase came as Europe has sent tankers of distillate to shore up the tightest market that we have seen in years, with record-breaking cold! How Cold is it? It was so cold that former bearish oil analysts have changed colors and now are suddenly bullish. Now that is cold!

Gasoline supply rose by 1.87 million barrels as refiners maxed out distillate and drivers stayed closer to home to stay warm. Cushing, Okla., the NYMEX delivery point, also saw another 2.11 million barrel drop.

Now as refiners clamor for more oil, U.S. shale producers are not rising to the occasion. At least not in the United States, where refiners still covet that heavy crude and shale light condensate is helping, but is not able to replace the heavy blend.

Natural gas, on the other hand, is not getting as much of a boost on the cold. Strong U.S. production numbers are helping this market stay somewhat grounded. Of course, if we see a bigger than expected withdrawal today that could change.

The cold in the south could impact crops. We are seeing a move up in the orange juice market and your salad could get a bit more expensive if the cold sets in.

Bitcoin may be pulling back, but Ripple is ripping. Ripple now is the second most capitalized cryptocurrency. Gold, the original alternative currency, has also been on a tear. Gold hit another three-month high after 8 higher closes. After the Fed Minutes, we backed off and with the dollar looking to perhaps stop the free fall, gold may see some profit-taking.

The oil super cycle has just begun. While we will get a pullback after it warms up, there is no doubt that we are in a new bull cycle. As I have written many times before, the double bottom at $26 per barrel on the monthly chart and the fact that we saw the largest pullback in capital spending in history impacted futures supplies.

At every major oil market bottom, they say this time is different, yet it usually is not. Low prices cure low prices and many missed the signals. Most of the crazy calls for $10 a barrel oil and predictions that oil would never trade above $40 then $50 then $60 are distant memories. Shale oil increases are not keeping up with demand and we will need them to ramp up because barring an economic downturn, or black swan, we are now behind the demand curve. Last year many were in denial but now the demand numbers and the crude supply drops are speaking for themselves.