United States Oil (USO) – Donald Trump is trying to drive up the price of oil

United States Oil (USO) – Donald Trump is trying to drive up the price of oil

For more than three decades, U.S. presidents proclaimed cheap fuel as an almost God-given right for American motorists and homeowners, shaping the country’s foreign policy in pursuit of lower prices. As president, Trump didn’t just back cheap crude, he was its biggest supporter, frequently attacking OPEC and celebrating the shale boom’s deliverance of “energy dominance.”

Now, the Russia-Saudi price war and a killer pandemic have caused prices to plunge, putting Trump in the awkward position of begging those same countries to turn off the taps, even though retail gasoline will become more expensive as well. The U-turn comes as America has gone from being the top importer of oil to the top producer, aligning its interests more closely with Saudi Arabia and Russia in a shift that holds the potential to reverberate through foreign policy for years to come.

“It used to be very clear. For decades, when the U.S. was the largest importer, low oil prices were a real benefit to the country,” said Dan Yergin, a Pulitzer Prize-winning oil historian and vice chairman of IHS Markit Ltd. “But now, it’s very different. It’s become such an important industry again, with the supply chains that go all across the country.”

The new direction could change both how the U.S. engages with its Middle East allies when prices rise and how the market itself is perceived. Just as many Wall Street traders have assumed that the U.S. Federal Reserve will save the day since the 1987 Black Monday crash, oil traders may now expect the same from the White House.

Trump administration officials have said they are prepared to support OPEC and its allies agreeing to restrain output to lift oil prices. For now, Trump hasn’t said whether he would try to rein in U.S. production or limit crude exports. But he has threatened to put tariffs on foreign crude to protect energy workers and domestic oil companies if the Saudis and Russians don’t agree to output cuts.

“I never thought I’d be saying that maybe we have to have an oil increase, because we do,” Trump said in late March. “The price is so low.”

Trump will likely aim for an oil-price sweet spot, said Kevin Book, managing director of research firm ClearView Energy Partners.

It needs to be high enough to sustain a domestic industry tied to about 10.9 million jobs, including 1.1 million directly connected with production, drilling and support activities. At the same time, it needs to be low enough to provide cheap energy to help prompt an economic rebound after the coronavirus pandemic subsides.

Even as the U.S. claimed the title of the world’s top oil producer, the country has remained at the mercy of Saudis who have a geological advantage over America and can extract crude at much lower prices. And now the oil that made America energy dominant is so costly to extract that almost 40% of U.S. producers face insolvency within the year if prices remain near $30 per barrel, the Federal Reserve Bank of Kansas City warned on Tuesday.

Trump isn’t the first president to criticize OPEC for prices being too low. The last time the U.S. so publicly begged the alliance to scale down output was April 1986, when Ronald Reagan was spooked by plummeting prices hurting oil producers in Alaska and Texas. He dispatched then-Vice President George H.W. Bush to Saudi Arabia.

In comments similar to Trump’s today, Bush told the late King Fahd that the U.S. is interested in “cheap energy,” according to contemporaneous press reports. Yet he also cast cheap crude as a double-edged sword for America, stressing that “a viable domestic oil industry is in the national security interests of the United States,” recalled Bob McNally, founder of oil consultant Rapidan Energy Group, in his book “Crude Volatility.”

Bush’s mission was not an immediate success. Although Bush and King Fahd agreed the world needed stable oil prices, they did not agree on how to achieve them. And Saudi oil production continued to rise for at least four more months. OPEC countries ultimately agreed to cut output and abide by quotas by December 1986, eight months after Bush’s visit.

Now Trump is in a similar position, as he exhorts Russian President Vladimir Putin and Saudi Crown Prince Mohammed Bin Salman to slash production by at least 10 million barrels a day, despite having blasted OPEC in the past as a “monopoly” that is “robbing our country blind” and having long celebrated low gasoline prices as a “tax cut” on American consumers.

“It’s a remarkable change,” said Jason Bordoff, a White House energy adviser during the Obama administration. “The American political consciousness has been shaped by half-a-century of worry about high prices and foreign oil.”

Not everyone, though, is happy with Trump’s shift. “We’ve seen every president declare that we are energy independent and then we find ourselves pleading with the Saudis and Russians,” said Robbie Diamond, head of Securing America’s Future Energy, a group that argues for a greater variety of transportation fuels and more transparent oil markets.

“If we were energy dominant,” he said, “we would not be groveling to these countries to cut production.”

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 7.87.

The projected upper bound is: 6.71.

The projected lower bound is: 3.80.

The projected closing price is: 5.25.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 21 white candles and 29 black candles for a net of 8 black candles.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 60.0000. This is not an overbought or oversold reading. The last signal was a buy 5 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 42.10. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 4 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 62. This is not a topping or bottoming area. The last signal was a sell 1 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 7 period(s) ago.

Rex Takasugi – TD Profile

UNTD ST OIL FUND closed up 0.280 at 5.370. Volume was 94% below average (consolidating) and Bollinger Bands were 4% wider than normal.

Open     High      Low     Close     Volume___
5.080 5.400 4.940 5.370 2,832,458
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 4.91 8.15 10.94
Volatility: 161 141 79
Volume: 155,741,792 76,844,160 37,917,624

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

UNTD ST OIL FUND is currently 50.9% below its 200-period moving average and is in an downward trend. Volatility is high as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 59 periods.

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