Oil Market Continues to Believe Trump's Peace Promises
The oil market has been volatile over the past few months due to ongoing tensions between the US and Iran. President Donald Trump's statements on negotiations with Iran have had a significant impact on oil prices, with oil plummeting whenever he declares progress in talks or promises a ceasefire.
Since March, oil prices have tumbled 9% or more eight times over single- or multi-day stretches. Most of these declines were due to Trump's administration declaring progress in negotiations or promising the reopening of the Strait of Hormuz.
Oil companies' crude inventories are dwindling rapidly, with Cushing, Oklahoma's stockpiles falling below operational stress levels. The crucial junction has tumbled to 18.6 million barrels, which is below the 20 million barrel threshold that puts added stress on the massive facility's operations.
The disconnect between oil prices and market tightness has rarely been larger. Kieran Tompkins, senior climate and commodities economist at Capital Economics, argues that the oil market may be underpricing the risk of inventory depletion. When oil reserves have been at these historically low levels, oil prices typically trade 20% higher.