The speculators are at it again in the oil market, pushing up prices beyond the fundamentals. Sure the market is tighter than it was two years ago, but one look at gasoline inventories tells you there are more than ample petroleum supplies. In fact, we have more gasoline inventories than a year ago, and we still have over 400 million barrels of oil in storage with both Saudi Arabia and Russia now free to increase production limits going forward, something Russia has been chomping at the bit to do the last year of the OPEC deal. Throw in the US Oil production near 11 million barrels per day at all-time record levels, and things are not near as tight in the oil market as the oil bulls would have you believe right now. 

How do you know there is a bunch of rampant speculation in the oil market beyond the fundamentals, just look at how many speculators ran from the market in front of the most recent OPEC meeting. We dropped from $72 a barrel all the way down to $64 a barrel in two weeks, most of the move coming in five short days. Why this is important is that nothing changed in the fundamentals during those five days or two weeks, what changed was event risk for the oil speculators. Rampant over speculation is nothing new in the oil markets and is part of the problem with oil markets in general. Once the new money starts flowing into a market it brings in a lot of oil tourists causing prices to rise above the fundamentals. This happened in 2007 right before the economic collapse and is helping further set the stage for the next economic collapse. Trump realizes the fact that higher gas prices offset his tax cuts, and serves to undermine his stimulus boost for the economy. 

And let's face it Donald Trump and the Republicans best argument going into this November`s midterm elections is the economy, and higher oil and gas prices start biting into this argument. Donald Trump reached out to Saudi Arabia this weekend, and I am sure he will do the same with Russia as well in a couple of weeks with the Putin Summit. OPEC is going to increase production and some of the most recent oil outages are going to come back online. However, we are in the heart of the summer driving season and refiners are maxing out utilization rates leading to more demand for oil from a seasonal standpoint. All of which will normalize again in the fall as refiners cut back demand for oil as they lower utilization rates, and some even go into maintenance mode as demand for oil is reduced in the market. The market could actually look rather bloated again in the fall if the US Production crosses over the 11 million barrel threshold, and Saudi Arabia and Russia both increase production rather dramatically.