It looks like oil is consolidating for another leg up as it shakes off political uncertainty in Germany, one of the reasons we pulled back yesterday, and instead on talk of another big drop in supply in the Cushing Oklahoma. Market chatter has the NYMEX delivery point falling at least 1 million barrels and some say the drop could be more than 2 million barrels. Last week the Energy Information Administration (EIA) reported that Cushing's crude oil inventories fell by 1,504 barrels. The Cushing draws will continue as U.S. refiners are in a mad rush to keep up with distillate demand as supplies are the tightest we have seen in years and are well below the five-year average.
That will keep oil that is unquestionably in a bull market rising as refiner demand will keep a bid on all grades of crude. Brent Crude which is in the high $62 a barrel handle will also be bid as European Refiners are looking to keep running and seasonal North Sea production issues are just up ahead. With a U.S. tax cut bill looking more likely like a done deal, at some point will only add to the projected demand for oil.
I told Liz Claman on the Closing Bell on Fox Business Network that a tax cut bill over time might double the stock market over a period and would be wildly bullish for economic growth. While that might sound optimistic there is a historical basis to it. Now Goldman Sachs co-chief markets economist Charles Himmelberg is predicting that 2018 will be another year of strong growth for the worldwide economy. He and his team expect the global economy to grow 4 percent next year in which there will be growth surprises to the upside.
4% growth for the U.S. economy means oil well above $60 a barrel as demand will outstrip the shale oil producer's ability to keep up with the growth. Oil bears are changing their tune as they are getting squeezed out by record longs. Predictions of surging U.S. production is falling short and the expected extension of OPEC production cuts will continue to drain global supply. Hedgers need to be hedged if they are not all ready as the risks of upside price spikes are growing.
